A firm is a price taker if it
A)always sells its output at the industry-determined price.
B)takes consumer demand into consideration in setting its price.
C)takes its production costs into consideration in setting its price.
D)uses a pricing strategy to gain market share.

Question

Quizplus · Accepted Answer

A firm is a price taker if it always sells its output at the industry-determined price, meaning it has no control over the price and must accept the going rate in the market. They cannot raise their price without losing a significant amount of customers, nor can they lower their price because they will not obtain a significant number of new customers. Therefore, they have to accept whatever price the market determines for their product.

A Firm Is a Price Taker If It