Final answer:
A price-taking firm is a small competitor in a perfectly competitive market with many firms, that produces an identical product and cannot influence market prices.
Step-by-step explanation:
The situation of a price-taking firm is best described as one of a large number of firms producing a product that is identical to that of every other firm in the industry and providing only a fraction of the total market supply. A price-taking firm is typically a very small player in the market, operating in a perfectly competitive environment. Such firms must accept the market-determined price because attempting to set a higher price would lead to losing all sales to competitors, as the products are homogeneous and consumers can easily switch to other sellers.