Final answer:
A price-taking firm is a small player in a perfectly competitive market that must accept the prevailing equilibrium price determined by supply and demand.
Step-by-step explanation:
A price-taking firm is a firm that operates in a perfectly competitive market. In such a market, the firm is a very small player compared to the overall market. The firm has no control over the market price and must accept the prevailing equilibrium price determined by supply and demand in the entire market. If the firm tries to raise the price even by a penny, it will lose all of its sales to competitors.
For example, let's consider a farmer who grows wheat. The farmer is a price-taking firm because they have no control over the market price of wheat. The market price is determined by the collective supply and demand of all wheat producers and buyers. The farmer must accept the prevailing market price and cannot influence it.
Overall, a price-taking firm is small in size and has no pricing power in the market. It must accept the market price determined by supply and demand.