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 in order 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

In perfect competition, there are numerous suppliers of a homogeneous product, and buyers have perfect information about prices. Therefore, if a price taker increased its price, consumers would simply buy from other suppliers. As a result, a price taker in a perfectly competitive market must accept the prevailing market price.

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