1.

Discuss how under perfect competition, a firm is a price taker and an industry a price maker.

Answer»

There are a large number of buyers and sellers of the commodity under perfect competition each too small to influence the price of the commodity by his actions. Under perfect competition a firm produces such a small part of the total market output that a change in its output will have no significant effect on the market supply and hence price of the commodity. A firm under perfect competition cannot influence the market price by increasing or decreasing the quality of output it produces.



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