Question of the Week

Price taker markets differ from price searcher markets because in a price taker market:

a) Firms produce identical products.
b) Output from one firm has very little effect on the market price.
c) Sellers face a perfectly elastic (horizontal) demand curve.
d) All of these are characteristics of a price takers market.
e) None of these are characteristics of a price takers market.


Answer:

The correct answer is d.

A price taker is a firm that can alter its rate of production and sales without significantly affecting the market price of the product because their output is small compared to the overall market.

What is a Price Taker? - learn what a price taker is and simplify the definition between investing and trading.

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