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Chapter 21: Problem 22

The perfect competitor is (LO4) a) a price maker rather than a price taker b) a price taker rather than a price maker c) a price taker and a price maker d) neither a price maker or a price taker

Short Answer

Expert verified
In a perfectly competitive market, a perfect competitor has no control over the market price and must accept the prevailing market price for their good or service, making them a price taker. The correct answer is b) a price taker rather than a price maker.

Step by step solution

01

A price maker is a firm that can influence or set the market price for a good or service, typically due to market power or a lack of competition. A price taker, on the other hand, is a firm that has no control over the market price and must accept the prevailing market price for their good or service. #Step 2: Characteristics of perfect competition#

Perfect competition is a market structure with a large number of buyers and sellers, homogeneous products, easy entry and exit for firms, and perfect information. In a perfectly competitive market, no single buyer or seller has enough market power to influence the market price. #Step 3: Identify the perfect competitor's role in price determination#
02

In perfect competition, the market price is determined by the forces of supply and demand. Due to the large number of competitors and homogeneous nature of the product, individual firms cannot influence the market price. As a result, they must accept the prevailing market price for their goods or services. #Step 4: Determine the correct option#

Based on our analysis, a perfect competitor has no control over the market price and must accept the prevailing market price for their good or service, making them a price taker. Therefore, the correct answer is: b) a price taker rather than a price maker

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Most popular questions from this chapter

Which one of these markets would definitely not be perfectly competitive? (LO4) a) Foreign currency b) Wheat c) HDTVs d) The New York Stock Exchange

Statement I: The advent of the Internet has brought "perfect knowledge" closer to reality. Statement II: The cost of businesses buying their supplies online is convenient, but they generally pay more than they would if they used customary channels. (LO3) a) Statement I is true, and statement II is false. b) Statement II is true, and statement I is false. c) Both statements are true. d) Both statements are false.

At an output of \(5, \mathrm{MC}=\$ 49\) and ATC \(=\$ 52\). At an output of \(6, \mathrm{MC}=\$ 59\) and ATC \(=\$ 53\). At the breakeven point, ATC is (LO6) a) above \(\$ 53\) b) \(\$ 53\) c) between \(\$ 52\) and \(\$ 53\) d) \(\$ 52\) e) less than \(\$ 52\)

Which statement about the perfect competitor is true? (LO4) a) She may charge a little below market price to get more customers. b) She may charge a little above market price to imply that her product is superior. c) She will always charge the market price. d) None of these statements is true.

The marginal cost curve intersects the ATC curve at its (LO5) a) minimum point, which is the break-even point b) maximum point, which is the break-even point c) minimum point, which is the shut-down point d) maximum point, which is the shut-down point
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