A perfectly competitive market is a imaginary market where competition is at its greatest possible level or in other words perfect competition is a...
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A perfectly competitive market is a imaginary market where competition

is at its greatest possible level or in other words perfect competition is a market arrangement that leads to the Pareto-efficient allocation of economic resources. Pareto efficiency infers that resources are allocated in the most economically efficientmanner, but does not imply equality or fairness.
A flawlessly competitive market is categorized by many buyers and sellers, homogeneous products, no transaction costs, no barriers to entry and exit, and perfect information about the price of a good. The total income or revenue for a firm in a perfectly competitive market is the product of price and quantity (TR = P * Q). The average income or revenue is calculated by dividing total revenue by quantity. Marginal revenue is calculated by dividing the variation in total revenue by change in quantity.
The perception of perfect competition applies when there are many producers and consumers in the market and no single company can influence the pricing. Characteristics of a perfectly competitive market are as follows.
· There are many buyers and many sellers in the market.
· Each company makes an identical product.
· Buyers and sellers have entree to perfect information about price.
· There are no transaction costs.
· There are no obstacles to entry into or exit from the market.
In order to attain maximum profits in a perfectly competitive market, firms set marginal revenue equal to marginal cost (MR=MC). MR is the slope of the revenue curve, which is equal to also the demand curve (D) and price (P). In the short-term, it is possible for financial profits to be positive, zero, or negative. When price is greater than average total cost, the firm is making a an income or profit. When price is fewer than average total cost, the firm is making a loss in the market.
Short‐run profit maximization
A firm maximizes its profits by choosing to supply the level of output where its marginal revenue equals its marginal cost. When marginal revenue exceeds marginal cost, the firm can earn better profits by increasing its output. When marginal revenue is lower than marginal cost, the firm is losing money, and subsequently, it must reduce its output. Revenues are therefore maximized when the firm chooses the level of output where its marginal revenue equals its marginal cost.
Long‐run profit maximization
Over the long-run, if firms in a perfectly competitive market are earning positive financial profits, more firms will enter the market, which will shift the supply curve to the right. As the supply curve shifts to the right, the stability price will go down. As the price goes down, economic profits will decline until they become zero.
The profit maximizing level of output, where marginal cost equals marginal revenue, effects in an equilibrium quantity of Q units of output. Because the firm's average total costs per unit equal the firm's marginal revenue per unit, the firm is earning zero economic profits.
An example would be a planned airline flight. The marginal costs of flying one more passenger on the flight are trivial until all the seats are filled. The airline would maximize profit by filling all of the seats.
The main difference between short-run and long-run profit maximization is that in the long run the quantities of all inputs, including physical capital, are choice variables, while in the short run the amount of capital is prearranged by past investment decisions. In both case there are inputs of labor and raw materials.





-With regards to the calculations of marginal revenue and marginal costs, where do you factor in fixed costs?
-The example shared regarding planned airline flights, infers that a full flight will maximize revenue. I used to work for multiple airlines in the early 200's and to my knowledge, a full flight doesn't always mean maximum profits. Did you factor in variable costs, such as landing fees, fueling costs, and other Airport authority fees that are unavoidable?

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