firms that are price takers group of answer choices are small relative to the total market. produce products that are different than their competitors. can sell only a portion of their output at the market price. have downward-sloping demand curves.
What are the characteristics of firms that are price takers?
Answer: Firms that are price takers have specific characteristics that distinguish them from other types of firms in the market:
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Small Relative Size: These firms are usually small relative to the total market, which means that their individual actions do not have a significant impact on market prices.
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Homogeneous Products: Price takers produce homogeneous or identical products compared to their competitors. This uniformity eliminates any variation in the products offered, making them perfect substitutes in the eyes of consumers.
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Sell at Market Price: Price takers have to accept the market price as given. They can sell any quantity of their output at the prevailing market price but cannot influence the price through their individual actions.
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Perfectly Elastic Demand: These firms face a perfectly elastic demand curve, meaning that they have no market power to influence the price. The demand curve is horizontal at the market price level, indicating that the firm can sell all its output at the market price but cannot charge a higher price without losing all its sales volume.