Question

In a perfectly competitive market, an individual firm is called a price taker because ______.

Options

• it can fix any price it wants

• it is very large compared to the market

• it must accept the price set by market demand and supply

• it always sells at a loss

Answer 1

In a perfectly competitive market, an individual firm is called a 'price taker' because it must accept the price set by market demand and supply.

Explanation: 

Each firm is very small compared to the whole market, so it cannot influence price and must accept the market-determined price.