Perfectly competitive firms are referred to as price takers because the individual firm is so small relative to the market that its output decisions will not have any effect on the market-determined price.

Question

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Perfectly competitive firms are unable to influence the market price because they are too small relative to the overall market. As a result, they must accept the market price as given and adjust their output accordingly, making them "price takers."

Perfectly Competitive Firms Are Referred to as Price Takers Because