why is the firm under perfect competition a price taker
Dear student,
In a perfect competition there are large number of buyers and sellers. The price under perfect competition is determined by the forces of demand and supply. As the number of sellers are so large, a firm is just a small part of the industry, so it cannot influence the price of the product.
All the firms produce identical goods, so no firm has any basis to charge higher prices for its product. An individual firm has to accept the price prevailing in the market, it can only decide about the quantity of output which it has to produce.
Therefore, a firm under perfect market is a price taker.
Regards
In a perfect competition there are large number of buyers and sellers. The price under perfect competition is determined by the forces of demand and supply. As the number of sellers are so large, a firm is just a small part of the industry, so it cannot influence the price of the product.
All the firms produce identical goods, so no firm has any basis to charge higher prices for its product. An individual firm has to accept the price prevailing in the market, it can only decide about the quantity of output which it has to produce.
Therefore, a firm under perfect market is a price taker.
Regards