ECON 103 Lecture Notes - Lecture 12: Breakfast Cereal, Market Power, Perfect Competition

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After studying this chapter, you will able to. explain how price and output are determined in perfect competition. explain why firms sometimes shut down temporarily and lay off workers. explain why firms enter and leave the industry. predict the effects of a change in demand and of a technological advance. Markets for major grains like wheat and corn are perfectly competitive. The markets for some of the food items made from these commodities, like breakfast cereal are not perfectly competitive even though there is fierce competition between producers of cereals. It is very important to know the conditions that identify perfectly competitive markets. there are many producers where no single buyer has a large market share. In perfect competition, each firm is a price taker. A price taker is a firm that cannot influence the price of a good or service. No single firm can influence the price it must take the equilibrium market price.

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