Asked by Dharmesh Kharel on Jun 18, 2024
Verified
If the model of price-taking firms is so unrealistic and restrictive, why study it?
Price-Taking Firms
Firms that accept the market price as given and have no power to influence it.
Unrealistic
Lacking consideration of real situations; impractical or idealistic.
Restrictive
A term describing measures or policies that limit or constrain actions, activities, or expansions.
- Evaluate the relevance and application of the competitive price-taker model in understanding market dynamics.
Verified Answer
ST
Sophie TrotterJun 18, 2024
Final Answer :
It may be somewhat unrealistic, but it does have powerful explanatory power that approximates actions in the real world. Also, by studying this simple model first, we can move on to more complicated, and realistic, models. As with anything, you have to walk before you can run.
Learning Objectives
- Evaluate the relevance and application of the competitive price-taker model in understanding market dynamics.