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?

The correct answer is D. The individual firm is unable to affect market price through its output decisions.

A price-taking firm is a firm that cannot affect the market price of its product. This is because the firm is one of many firms in the market, and each firm produces a small fraction of the total output. As a result, the firm’s output decisions have a negligible impact on the market price.

Option A is incorrect because the number of employees a firm has does not necessarily determine whether it is a price-taking firm. For example, a large firm with many employees may be a price-taker if it is one of many firms in the market.

Option B is incorrect because the demand curve a firm faces does not necessarily determine whether it is a price-taking firm. For example, a firm with a downward-sloping demand curve may be a price-taker if it is one of many firms in the market.

Option C is incorrect because the assets a firm has does not necessarily determine whether it is a price-taking firm. For example, a firm with few assets may be a price-taker if it is one of many firms in the market.