A firm that is a price taker:

Question

Quizplus · Accepted Answer

A price taker is a firm that has no control over the price of its product and must accept the market price. Therefore, if the firm prices its product above the market equilibrium price, it will lose all sales because consumers will choose to buy from other producers who are selling at the market price or lower. Option A is incorrect because if a firm competes with other producers who produce differentiated products, it has some control over its price. Option B is incorrect because the size of the firm is irrelevant when determining whether it is a price taker or not. Option C is incorrect because a price taker is unable to exert any influence on the price of its product or the overall market.

A Firm That Is a Price Taker