Question

An individual firm under perfect competition is price taker.Explain how? ​

Answer 1

Hey Mate Here Is Ur Answer

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.

Hope It Helps Uh..!!!

Answer 2

In a perfectly competitive market,each individual firm is a price takes mainly because of high market competition and rivalry among the sellers/producers or firms selling identical or homogeneous products or services.

Explanation:

A perfectly competitive market structure is the most desired form of market in Microeconomics,from the standpoint of economic and social welfare and optimality. It is mainly characterized by the presence of numerous buyer/consumers and sellers or producers in the market selling identical or homogeneous products or services.There are no legal or administrative barriers for any firm or entry to enter or exit the market which along with product similarity or homogeneity basically leads to high market competition or rivalry among the sellers or producers.In this case,single firm has the ability to charge any price based on their profit maximizing output level as if any firm attempts to do so,it will eventually loose its existing customers as they have the option to go to any other seller in the market because every seller is selling similar or identical products(assuming identical product quality and specifications).Due to the presence of many buyers or consumers in the market,the sellers or firms are able to get enough customers and because of a fear or apprehension of loosing their existing customer base,firms or sellers refrain from setting their own individual profit enhancing price level,which essentially makes them price taker and not price maker such as a monopolist.