Question

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.

Answer 1

Answer:

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).