(3) sellers and buyers have all relevant information to make rational decisions about the product that they are

buying and selling; and (4) firms can enter and leave the market without any restrictions—in other words, there

is free entry and exit into and out of the market.

A perfectly competitive firm is known as a price taker, because the pressure of competing firms forces it to
accept the prevailing equilibrium price in the market. If a firm in a perfectly competitive market raises the

price of its product by so much as a penny, it will lose all of its sales to competitors. When a wheat grower, as

we discussed in the Bring It Home feature, wants to know the going price of wheat, they have to check on the

computer or listen to the radio. Supply and demand in the entire market solely determine the market price, not

the individual farmer. A perfectly competitive firm must be a very small player in the overall market, so that it
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