Question

A firm characterized as a price-taker:

a. has control over the price it pays, or receives, in the market.
b. is not a characteristic of a perfectly competitive market.
c. sets the price for the market.
d. takes the price that is determined from the lowest price consumers are willing to pay for an item.
e. has no control over the price it pays, or receives, in the market.

Answer 1

Answer: Option E

Explanation: A perfectly competitive company is known as a price-taker, because the competition of competing firms causes them to embrace the prevailing market price of equilibrium.

If a company raises the price of its product by as much as a penny in a perfectly competitive structure,then it will lose all of its sales to other firms. In such structures the prices are determined by the marker forces of demand and supply.

Hence from the above we can conclude that the correct option is E.