Under perfect competition, a firm is a price taker because:

Question

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Under perfect competition, there are a large number of small firms, each producing an identical product. As a result, no one firm can influence the market price and must accept the market-determined price. Setting a price higher than the marginal cost results in zero sales, as consumers have alternatives they can choose from that offer the same value at a lower price. Thus, firms cannot set prices above the market price, and they become price takers.

Under Perfect Competition, a Firm Is a Price Taker Because