In a perfectly competitive industry, individual firms act as:

Question

Quizplus · Accepted Answer

In a perfectly competitive industry, there are many small firms producing homogenous products, and no single firm has the ability to influence the market price. As a result, individual firms have to accept the prevailing market price and cannot set their own prices. Therefore, they are price takers, not price makers. They also try to maximize profits as profit maximization is a primary goal of firms in a market economy, but they cannot disregard market prices. In a perfectly competitive industry, individual firms have no control over the price and must accept the market price. Therefore, they act as price takers rather than price makers. They also aim to maximize their profits, but in doing so, they must take the market price into account and adjust their output accordingly.

In a Perfectly Competitive Industry, Individual Firms Act As