Chapter 11 - Perfect Competition

Chapter 11 - Perfect Competition - PERFECT COMPETITION 11...

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PERFECT COMPETITION 11 CHAPTER
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Sweet Competition Maple syrup is produced by about 12,000 farms in the United States and Canada in a highly competitive market. The Mediterranean coast is dotted with thousands of farmers growing Olives. We study such markets in this chapter.
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Competition Perfect competition is an industry in which: Many firms sell identical products to many buyers. Consumers choose based on price. There are little/no restrictions to entry into the industry. Each firm is relatively small compared to the whole market Established firms have no advantages over new ones. Sellers and buyers are well-informed about prices.
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Competition In perfect competition, each firm is a price taker. A price taker is a firm that cannot influence the price of the product. A firm’s output is a perfect substitute for the output of the other firm. Demand for each firm’s output is perfectly elastic .
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The goal of each firm is to maximize economic profit Economic Profit = Total Revenue minus Total cost . A firm’s
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Chapter 11 - Perfect Competition - PERFECT COMPETITION 11...

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