Perfectly Competitive Firms as Price Takers

Steps:

• Recall the definition of perfect competition: many small firms sell identical products in a market with free entry and exit.
• Identify key traits: firms cannot influence market price due to large number of sellers and buyers.
• Evaluate choices against traits: look for the one matching inability to set prices.
• Select the option describing firms accepting the market price.

Why D is correct:

• In perfect competition, firms are price takers because the market sets the price through supply and demand, and no single firm can affect it due to its small size relative to the market.

Why the others are wrong:

• A: Perfect competition features many competitors, not absence.
• B: Firms engage in no non-price competition like advertising; focus is solely on price.
• C: One dominant firm describes monopoly, not perfect competition's many equal firms.

Final answer: D