If firms are price takers this implies that

Question

Quizplus · Accepted Answer

Price takers are firms that cannot affect the market price of the goods they produce or sell. Therefore, they face a perfectly elastic demand curve. This means that they can sell any quantities of their output at the prevailing market price, but any attempt to charge a higher price would result in zero sales. Option A is incorrect because economic profits may be positive or negative in the short-run depending on the total revenue and total cost. Option C is incorrect because the total revenue curve is upward sloping for price takers. Option D is incorrect because the marginal revenue curve for price takers is the same as the demand curve and is perfectly elastic.

If Firms Are Price Takers This Implies That