Why is a firm a price taker and not a price maker under perfect market conditions?
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...
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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.