Question

Price-taking firms, i.e., firms that operate in a perfectly competitive market are said to be "small" relative to the market. Which of the following best describes this smallness?

• A. The individual firm must have fewer than 10 employees.
• B. The individual firm faces a downward-sloping demand curve.
• C. The individual firm has assets of less, than Rs. 20 lakh
• D. The individual firm is unable to affect market price through its output

Answer 1

The correct option is D The individual firm is unable to affect market price through its output

In perfect competition, there are large number of sellers and individual firm (one seller), sells very "small" portion of total sales, So one firm unable to influence the price of the commodity in the market.