What is Perfect Competition

•Homogenous Products (All perfect substitutes)
•All firms have access to factors of production
•Large number of buyers and sellers
•Free entry/exit to/from markets
•Perfectly elastic demand curve
•Perfect knowledge / information
•Profit maximization


Price and Output in Perfect Competition

•When drawing perfect competition diagrams, remember to make a distinction between the market and a representative individual firm.
•Each individual firm is a price taker in a perfectly competitive market
•Average revenue equals marginal revenue at every level of output
•We must assume that the aim of each firm is to find a profit-maximizing output





The Shut Down Price (Short Run)






Última modificación: martes, 14 de agosto de 2018, 10:21