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Chapter 8: Q.13 (page 211)

What is a “price taker” firm?

Short Answer

Expert verified

In a perfect market, the price of a product is determined by market forces rather than by individual firms.

Step by step solution

01

Definition

A price taker firm is one that must accept equilibrium price prevailing in the market and it has no ability to influence the price of its product.

02

Explanation

In a perfect competitive market, the price of a product is determined by market force and not by an individual firm. There are many sellers in perfectly competitive markets, who sell similar products and in that case, they must act as a price takers.

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Most popular questions from this chapter

Will a perfectly competitive market display productive efficiency? Why or why not?

A single firm in a perfectly competitive market is relatively small compared to the rest of the market. What does this mean? How “small” is “small”?

Do entry and exit occur in the short run, the long run, both, or neither?

Look at Table 8.13. What would happen to the firm’s profits if the market price increases to $6 per pack of raspberries?

What price will a perfectly competitive firm end up charging in the long run? Why?
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