Which of the following best explains why a firm in a perfectly competitive market must take the price determined in the market?
A) The short-run average total costs of firms that are price takers will be constant.
B) If a price taker increased its price, consumers would buy from other suppliers.
C) Firms in a price-taker market will have to advertise to increase sales.
D) There are no good substitutes for the product supplied by a firm that is a price taker.

Question

Quizplus · Accepted Answer

A firm in a perfectly competitive market is a price taker because it has no control over the market price. If the firm were to increase its price, consumers would simply buy from other suppliers, causing the firm to lose business. Therefore, the firm must take the price determined in the market.

Which of the Following Best Explains Why a Firm in a Perfectly