Slide 1
Perfect Competition
The Three Requirements of Perfect Competition
A Large Number of Buyers and Sellers
A Standardized Product Offered by Sellers
Easy Entry into and Exit from the Market
Slide 7
Is Perfect Competition Realistic?
Figure 1: The Competitive Industry and Firm
Goals and Constraints of the Competitive Firm
The Demand Curve Facing a Perfectly Competitive Firm
Slide 12
Cost and Revenue Data for a Competitive Firm
Figure 2(a): Profit Maximization in Perfect Competition
Figure 2(b): Profit Maximization in Perfect Competition
The Total Revenue and Total Cost Approach
The Marginal Revenue and Marginal Cost Approach
Measuring Total Profit
Figure 3(a): Measuring Profit or Loss
Slide 20
The Firm’s Short-Run Supply Curve
Figure 4: Short-Run Supply Under Perfect Competition
The Shutdown Price
Competitive Markets in the Short- Run
The (Short-Run) Market Supply Curve
Short-Run Equilibrium
Figure 6: Perfect Competition
Figure 7: Short-Run Equilibrium in Perfect Competition
Profit and Loss and the Long Run
From Short-Run Profit to Long-Run Equilibrium
Slide 31
Figure 8(a/b): From Short-Run Profit To Long-Run Equilibrium
Figure 8(c/d): From Short-Run Profit To Long-Run Equilibrium
From Short-Run Loss to Long-Run Equilibrium
Distinguishing Short-Run from Long-Run Outcomes
The Notion of Zero Profit in Perfect Competition
Perfect Competition and Plant Size
Figure 9: Perfect Competition and Plant Size
A Summary of the Competitive Firm in the Long-Run
A Change in Demand
Figure 10: An Increasing-Cost Industry
Slide 42
Increasing, Decreasing, and Constant Cost Industries
Slide 44
Market Signals and the Economy
Slide 46