Chapter 10R, Problem 25MCQ

To determine

The correct option for given situation where firms that are price takers.

Answer to Problem 25MCQ

Option b is correct answer.

Explanation of Solution

Explanation for correct option:

b.

In perfect competition, there are many sellers selling identical products in the market at the same price. They are the price takers not makers unlike monopoly. In monopolistic competition also, firms sells their products as per the competitor’s price to compete in the market. Therefore, option b is correct.

Explanation for incorrect options:

a.

Along with perfect competition, monopolistic competition is also a price taker type market structure. Therefore, option a is incorrect.

c.

In oligopoly market structure there are few sellers who can decide their prices of their products but are influenced by their competitor’s price too. In monopoly competition, there is only seller who can decide its own price. Therefore, option c is incorrect.

d.

In oligopoly market structure there are few sellers and prices are decided as per the other competitors in the market. Perfect competition is the price taker as they sell identical products in the market. Therefore, option d is incorrect.

e.

Monopoly firms are price setters instead of price taker whereas monopolistic competition firms are price takers as they sell similar utility products with differentiated firm. Therefore, option e is incorrect.

Economics Concept Introduction

Perfect competition: In perfect competition type of market structure, the firms sell similar products and are the price takers as if any of the firm does not sell the similar product at the similar price then it may not stay longer in the market competition.