Final answer:
In a perfectly competitive market, the price of a product is determined by the interaction of supply and demand, and no individual firm can influence the market price.
Step-by-step explanation:
In a perfectly competitive market, the price of a product is determined by the interaction of supply and demand. No individual firm has the power to influence the market price. This is because in perfect competition, there are many firms producing identical products, with many buyers and sellers. Additionally, all sellers and buyers have access to relevant information to make rational decisions.
For example, suppose a firm decides to increase the price of its product. Since there are many other firms producing the same product, buyers can easily switch to a different firm offering the same product at a lower price. The increased competition among the firms will force prices back down to the market equilibrium.
Therefore, perfect competition ensures that prices are not determined by individual suppliers or consumers, but rather by the overall market forces of supply and demand.