611512 - 12-1Perfect CompetitionMarket structure in the...

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Unformatted text preview: 12-1Perfect CompetitionMarket structure in the output market.Number of firmsType of productEase of entry/exitMarket info and knowledgePrice and output are strongly related to market structure.12-2Perfect CompetitionHomogeneous or standardized productEnough firms so that each firm is small relative to the market. Thus, no control over price.No obstacles to entry and exit.Perfect info about product and market. Best method of production & market price. Also potential entrants know whether existing firms earn economic profits. 12-3Firms Demand and Perfect CompetitionSince each firm is a price-taker, its demand curve is horizontal at the market price. It can also said to be perfectly elastic at the market price.PQQPSDPDPMarketFirm12-4Firms DemandThe firms demand curve in perfect competition is also the MR curve since each additional unit adds a constant amount (Price) to Total revenue(TR)Average Revenue curve since AR is TR/Q12-5Profit Maximization in the Short...
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611512 - 12-1Perfect CompetitionMarket structure in the...

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