In a perfectly competitive industry, individual firms act as price takers.

Question

Quizplus · Accepted Answer

In a perfectly competitive industry, there are many small firms selling homogeneous products, and no single firm has enough market power to affect the market price. Therefore, each firm must accept the prevailing market price and cannot charge a higher price without losing customers. Hence, firms in such an industry act as price takers. In a perfectly competitive industry, there are many firms producing identical products and the market sets the price. Individual firms have no control over the price and must accept it as given, making them price takers.

In a Perfectly Competitive Industry, Individual Firms Act as Price