Completely competitive market exist when each member is a —

Analyze the question The question asks what each buyer and seller is in a perfectly (completely) competitive market.

Explain the concept In a perfectly competitive market:

• There are very many buyers and sellers.
• The products are homogeneous (identical).
• Entry and exit are free.
• Buyers and sellers have perfect knowledge of the market.
• No single buyer or seller is large enough to influence the market price.

Because of this, the price is set by the overall forces of demand and supply in the market. Each individual firm or buyer simply accepts that price. This makes them a price taker.

Solution, option by option

• A. Price maker: This describes a monopolist or a firm with market power, not a firm in perfect competition. Wrong.
• B. Price taker: Each firm must accept the going market price. If it charges more, buyers go elsewhere. If it charges less, it loses revenue for no reason. Correct.
• C. Price seeker: This term is used for firms with some control over price, such as monopolistic competitors. Wrong.
• D. a and b: This would include price maker, which is wrong. So D is wrong.

Answer: The correct option is B. price taker.

Exam tip: Link the market structure to price power:

• Perfect competition = price taker (the firm has no power).
• Monopoly = price maker (the firm has the most power).
• Monopolistic competition and oligopoly = some power (price seekers).

Remember it this way: "Perfect competition, perfectly powerless over price."