When We Say That a Firm Is a Price Taker

question 8

Multiple Choice

When we say that a firm is a price taker, we are indicating that the

• A) firm takes the price established in the market then tries to increase that price through advertising.
• B) firm can change output levels without having any significant effect on price.
• C) demand curve faced by the firm is perfectly inelastic.
• D) firm will have to take a lower price if it wants to increase the number of units that it sells.

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Definitions:

Optimal Bundle

The combination of goods and services that maximizes an individual's utility given their budget constraint.

Original Prices

The initial cost or value of goods and services before any discounts, markdowns, or adjustments.

Utility Function

A mathematical representation in economics that reflects consumer preferences, assigning a value to each possible bundle of goods.

Price Increase

A rise in the cost of goods or services in an economy, often measured by indices such as the Consumer Price Index (CPI).