Harry Smith sells wheat in a price-taker market. With regard to Smith's price and output choices, which of the following is true?
A) Smith will constantly attempt to increase the price of his product so he can increase his total revenue.
B) Since the price of his product is dictated by the market, Smith will not have an incentive to control per-unit cost.
C) Since the price of his product is dictated by the market, Smith has no production decisions to make.
D) It would be senseless for Smith to try to increase sales by lowering the price of his product.

Question

Quizplus · Accepted Answer

In a price-taker market, Smith cannot influence the market price by changing his own price. Lowering his price would not increase sales, as buyers can purchase the same product at the market price elsewhere.

Harry Smith Sells Wheat in a Price-Taker Market