Why is a firm a price taker and not a price maker under perfect market conditions?
- print Print
- list Cite
Expert Answers

calendarEducator since 2009
write35,413 answers
starTop subjects are History, Literature, and Social Sciences
In perfect market conditions (also called perfect competition) a firm is a price taker because other firms can enter the market easily and produce a product that is indistinguishable from every other firm’s product. This makes it impossible for any firm to set its own prices.
A price taker is a firm that cannot have any say in setting its own prices. A price taker simply has to accept the market price. This is in contrast to a...
(The entire section contains 237 words.)
Unlock This Answer Now
Start your 48-hour free trial to unlock this answer and thousands more. Enjoy eNotes ad-free and cancel anytime.
Related Questions
- When a competitive firm is a "price taker" it means that the individual firm... can change the...
- 1 Educator Answer
- What is the function of price in a free market economy?
- 3 Educator Answers
- Describe the practices of firms that are in markets with perfect competition and in a monopoly.
- 1 Educator Answer
- Give examples of firms that have a pure competition market structure.
- 1 Educator Answer
- Compare the market equilibrium under perfect competition and monopoly.
- 1 Educator Answer
A Perfectly Competitive Market is one in which the number of sellers is large and all of them are producing homogeneous goods, and there is no price competition.
A price is set by the industry and each firm acts as a price taker, this happens because all firms are producing homogeneous goods due to which they cannot set different prices, because if a firm sets different prices the consumer will shift towards another firm.
Student Answers