In a perfectly competitive industry, each firm:

• A. faces a downward-sloping demand curve for its product
• B. can set its own price above the market equilibrium
• C. produces a unique product that is different from its competitors
• D. is a price taker and cannot influence the market price

Answer: (D)

Verified step by step guidance

1. Understand the characteristics of a perfectly competitive market: many firms, identical products, and free entry and exit.
2. Recall that in perfect competition, each firm faces a perfectly elastic (horizontal) demand curve at the market price, meaning the firm is a price taker.
3. Recognize that because the product is identical and there are many sellers, no single firm can influence the market price by changing its own output or price.
4. Note that the firm's demand curve is not downward-sloping but perfectly elastic at the market price, so the firm cannot set its own price above equilibrium.
5. Conclude that the correct statement is that each firm is a price taker and cannot influence the market price.