CA Foundation Exam > CA Foundation Questions > The firm in a perfectly competitive market is...
Start Learning for Free
The firm in a perfectly competitive market is a price taker. This designation as a price taker is based on the assumption that
- a)the firm has some, but not complete, control over its product price.
- b)there are so many buyers and sellers in the market that any individual firm cannot affect the market.
- c)each firm produces a homogeneous product.
- d)there is easy entry into or exit from the market place.
Correct answer is option 'B'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Most Upvoted Answer
The firm in a perfectly competitive market is a price taker. This desi...
Explanation:
Perfectly competitive markets are characterized by certain assumptions, including:
- Homogeneous products: All firms in the market produce identical or very similar products.
- Many buyers and sellers: There are so many buyers and sellers that no single buyer or seller has any significant market power to influence the price of the product.
- Perfect information: All buyers and sellers have complete knowledge of the market, including prices, quality, and availability of products.
- Free entry and exit: Firms can enter or exit the market without significant barriers or costs.
Based on these assumptions, we can see why a firm in a perfectly competitive market is a price taker:
- Many buyers and sellers: Because there are so many buyers and sellers in the market, no individual firm can affect the market price. If a firm tries to charge a higher price, buyers will simply go to other firms offering the same product at a lower price. If a firm tries to charge a lower price, it will not gain any significant market share because there are so many other firms offering the same product at a similar price.
- Homogeneous products: Because all firms in the market produce identical or very similar products, buyers have no reason to prefer one firm over another based on product quality or features. Therefore, the only factor that influences their decision is price.
- Perfect information: Because all buyers and sellers have complete knowledge of the market, no firm can charge a significantly higher or lower price than its competitors without being quickly exposed and losing customers.
- Free entry and exit: Because firms can enter or exit the market without significant barriers or costs, there is always a large number of firms in the market, which prevents any one firm from gaining significant market power.
Therefore, a firm in a perfectly competitive market is a price taker because it has no control over the market price and must accept the prevailing market price as given.
Perfectly competitive markets are characterized by certain assumptions, including:
- Homogeneous products: All firms in the market produce identical or very similar products.
- Many buyers and sellers: There are so many buyers and sellers that no single buyer or seller has any significant market power to influence the price of the product.
- Perfect information: All buyers and sellers have complete knowledge of the market, including prices, quality, and availability of products.
- Free entry and exit: Firms can enter or exit the market without significant barriers or costs.
Based on these assumptions, we can see why a firm in a perfectly competitive market is a price taker:
- Many buyers and sellers: Because there are so many buyers and sellers in the market, no individual firm can affect the market price. If a firm tries to charge a higher price, buyers will simply go to other firms offering the same product at a lower price. If a firm tries to charge a lower price, it will not gain any significant market share because there are so many other firms offering the same product at a similar price.
- Homogeneous products: Because all firms in the market produce identical or very similar products, buyers have no reason to prefer one firm over another based on product quality or features. Therefore, the only factor that influences their decision is price.
- Perfect information: Because all buyers and sellers have complete knowledge of the market, no firm can charge a significantly higher or lower price than its competitors without being quickly exposed and losing customers.
- Free entry and exit: Because firms can enter or exit the market without significant barriers or costs, there is always a large number of firms in the market, which prevents any one firm from gaining significant market power.
Therefore, a firm in a perfectly competitive market is a price taker because it has no control over the market price and must accept the prevailing market price as given.
Attention CA Foundation Students!
To make sure you are not studying endlessly, EduRev has designed CA Foundation study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in CA Foundation.
|
Explore Courses for CA Foundation exam
|
|
Similar CA Foundation Doubts
Top Courses for CA FoundationView all
The firm in a perfectly competitive market is a price taker. This designation as a price taker is based on the assumption thata)the firm has some, but not complete, control over its product price.b)there are so many buyers and sellers in the market that any individual firm cannot affect the market.c)each firm produces a homogeneous product.d)there is easy entry into or exit from the market place.Correct answer is option 'B'. Can you explain this answer?
Question Description
The firm in a perfectly competitive market is a price taker. This designation as a price taker is based on the assumption thata)the firm has some, but not complete, control over its product price.b)there are so many buyers and sellers in the market that any individual firm cannot affect the market.c)each firm produces a homogeneous product.d)there is easy entry into or exit from the market place.Correct answer is option 'B'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The firm in a perfectly competitive market is a price taker. This designation as a price taker is based on the assumption thata)the firm has some, but not complete, control over its product price.b)there are so many buyers and sellers in the market that any individual firm cannot affect the market.c)each firm produces a homogeneous product.d)there is easy entry into or exit from the market place.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The firm in a perfectly competitive market is a price taker. This designation as a price taker is based on the assumption thata)the firm has some, but not complete, control over its product price.b)there are so many buyers and sellers in the market that any individual firm cannot affect the market.c)each firm produces a homogeneous product.d)there is easy entry into or exit from the market place.Correct answer is option 'B'. Can you explain this answer?.
The firm in a perfectly competitive market is a price taker. This designation as a price taker is based on the assumption thata)the firm has some, but not complete, control over its product price.b)there are so many buyers and sellers in the market that any individual firm cannot affect the market.c)each firm produces a homogeneous product.d)there is easy entry into or exit from the market place.Correct answer is option 'B'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The firm in a perfectly competitive market is a price taker. This designation as a price taker is based on the assumption thata)the firm has some, but not complete, control over its product price.b)there are so many buyers and sellers in the market that any individual firm cannot affect the market.c)each firm produces a homogeneous product.d)there is easy entry into or exit from the market place.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The firm in a perfectly competitive market is a price taker. This designation as a price taker is based on the assumption thata)the firm has some, but not complete, control over its product price.b)there are so many buyers and sellers in the market that any individual firm cannot affect the market.c)each firm produces a homogeneous product.d)there is easy entry into or exit from the market place.Correct answer is option 'B'. Can you explain this answer?.
Solutions for The firm in a perfectly competitive market is a price taker. This designation as a price taker is based on the assumption thata)the firm has some, but not complete, control over its product price.b)there are so many buyers and sellers in the market that any individual firm cannot affect the market.c)each firm produces a homogeneous product.d)there is easy entry into or exit from the market place.Correct answer is option 'B'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
Here you can find the meaning of The firm in a perfectly competitive market is a price taker. This designation as a price taker is based on the assumption thata)the firm has some, but not complete, control over its product price.b)there are so many buyers and sellers in the market that any individual firm cannot affect the market.c)each firm produces a homogeneous product.d)there is easy entry into or exit from the market place.Correct answer is option 'B'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
The firm in a perfectly competitive market is a price taker. This designation as a price taker is based on the assumption thata)the firm has some, but not complete, control over its product price.b)there are so many buyers and sellers in the market that any individual firm cannot affect the market.c)each firm produces a homogeneous product.d)there is easy entry into or exit from the market place.Correct answer is option 'B'. Can you explain this answer?, a detailed solution for The firm in a perfectly competitive market is a price taker. This designation as a price taker is based on the assumption thata)the firm has some, but not complete, control over its product price.b)there are so many buyers and sellers in the market that any individual firm cannot affect the market.c)each firm produces a homogeneous product.d)there is easy entry into or exit from the market place.Correct answer is option 'B'. Can you explain this answer? has been provided alongside types of The firm in a perfectly competitive market is a price taker. This designation as a price taker is based on the assumption thata)the firm has some, but not complete, control over its product price.b)there are so many buyers and sellers in the market that any individual firm cannot affect the market.c)each firm produces a homogeneous product.d)there is easy entry into or exit from the market place.Correct answer is option 'B'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice The firm in a perfectly competitive market is a price taker. This designation as a price taker is based on the assumption thata)the firm has some, but not complete, control over its product price.b)there are so many buyers and sellers in the market that any individual firm cannot affect the market.c)each firm produces a homogeneous product.d)there is easy entry into or exit from the market place.Correct answer is option 'B'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
|
|
Explore Courses for CA Foundation exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup