CS100 Lecture Notes - Perfect Competition, Market Power, Marginal Revenue
Document Summary
No restrictions for firms that want to enter or exit the market. Firms that are operating in a perfect market make 0 economic profit ( Everyone know all of the prices that the buyers and sellers are. Short -run economic profit and loss that are temporary. Marginal revenue of a firm is always constant and equal to the price. Many firms sell identical products to many buyers. There are no restrictions to entry into the industry. Established firms have no advantages over new ones. Sellers and buyers are well informed about prices. The firm"s minimum efficient scale is small relative to market demand, so there is room for many firms in the market. Each firm is perceived to produce a good or service that has no unique characteristics, so consumers don"t care which firm"s good they buy. In perfect competition, each firm is a price taker.
