Which of the following statements best reflects a price-taking firm? A. The firm can sell only a limited amount of output at the market price before the market price will fall. B. Price-taking firms maximize profits by charging a price above marginal cost. C. If the firm were to charge more than the going price, it would sell none of its goods.

Question

Social Studies

Gaven Boyd

11 June, 12:52

Which of the following statements best reflects a price-taking firm? A. The firm can sell only a limited amount of output at the market price before the market price will fall. B. Price-taking firms maximize profits by charging a price above marginal cost. C. If the firm were to charge more than the going price, it would sell none of its goods.

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Answers (1)

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Areli Bridges · Answer 1

C. If the firm were to charge more than the going price, it would sell none of its goods.

Explanation:

A price-taker firm is defined as an individual company which must accept the prevailing prices in the market, lacking a market share to influence the market price on its own.

If a company is considered as a price taker in the competitive market, it does not have the power to influence the present market price by the quantity of the products it produces.

Thus if a price taking firm can charge more for a product than the going market price, then it would not sell its products.

Hence the correct option is (C).