If every firm in a market is a price taker, then which of the following is true?

Question

If every firm in a market is a price taker, then which of the following is true?​

Quizplus · Accepted Answer

If every firm is a price taker, it means that no single firm has the power to influence the market price of the product. This is only possible when there are many sellers in the market, as each seller's output is small compared to the total market output. Therefore, option A is the correct choice. Option B is not necessarily true, as the presence of many substitutes does not imply that firms are price takers. Option C is irrelevant to the given condition of firms being price takers. Option D is not true because if there were few consumers, the firms would have market power. Option E is directly contradicted by the given condition that every firm is a price taker.

If Every Firm in a Market Is a Price Taker