Chapter 12, Section 12.1, In Text Question, Exercise 01
Page 324
Why do they call firms in a perfectly competitive market price takers?
Explanation
If a firm in a perfectly competitive market raises the price of its product by so much as a penny, it will lose all of its sales to competitors.
Many firms sell the same product in a perfectly competitive market hence there is nothing that makes a product better than the product of other firms.
All the buyers of the product know the price they must pay.
Answer
A perfectly competitive firm is known as a price taker because the pressure of competing firms forces them to accept the prevail equilibrium price in the market.
