A price maker
A) is a characteristic held by a perfectly competitive firm.
B) must set the price at the market price.
C) has some control over the price it charges.
D) can sell its product at any price.
E) will always make economic profits.

Question

Quizplus · Accepted Answer

A price maker has some control over the price it charges. This is typically seen in imperfectly competitive markets, where the firm has some degree of market power to set prices above the marginal cost of production. In contrast, a perfectly competitive firm is a price taker, meaning it must accept the market price and can only sell its product at that price. The statement that a price maker can sell its product at any price is not true, as there are limits to how high the price can be set without losing demand for the product. Similarly, the statement that a price maker will always make economic profits is not true, as profits will depend on the level of competition in the market and the firm's ability to set a price that covers its costs.

A Price Maker