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Question

Under perfect competition, the price is determined by the industry. At this price a firm can sell any quantity. The AR curve is perfectly elastic. Under monopoly, firms can sell more only at a lower price. So, AR is negatively sloped.
Which form of market is known as a price taker?

[1 mark]

A
Perfect competition
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B
Monopoly
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C
Monopolistic competition
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D
Oligopoly
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Solution

The correct option is A Perfect competition
Since the producers in the perfect competition take the prices from the market, they are termed as price takers

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