In the context of competitive markets, a price taker is:

• A. a firm or individual that accepts the market price as given and cannot influence it
• B. a government agency that regulates prices in the market
• C. a firm that sets its own prices above the market equilibrium
• D. a consumer who negotiates prices with sellers in the market

Answer: (A)

Verified step by step guidance

1. Understand the concept of a price taker in competitive markets: it refers to an economic agent (firm or individual) who must accept the prevailing market price because their own transactions are too small to influence the price.
2. Recognize that in perfectly competitive markets, there are many buyers and sellers, so no single participant can affect the market price by changing their own quantity supplied or demanded.
3. Eliminate options that describe agents who influence or set prices, such as firms setting prices above equilibrium or government agencies regulating prices, since these do not fit the definition of a price taker.
4. Note that consumers negotiating prices with sellers implies price setting or bargaining power, which contradicts the idea of accepting a given market price.
5. Conclude that the correct definition of a price taker is a firm or individual that accepts the market price as given and cannot influence it.