Perfect competition: perfect competition, total revenue, average revenue, marginal revenue, profit-maximizing output. 3. 2 firm"s mc curve=firm"s ss curve (if p>avc) 4: short-run and long-run impact of a shift in demand, rent controls revisited. Supply curve: exists only in perfect competition, reflects profit-maximizing behaviour. Ex. 1 you are an organic farmer (no pesticides). There is a sharp increase in the demand for organic foods. Answers: 1) yes: no (as other farmers switch to organic crops, until the economic profits are competed away) For economic profits to persist over the long run, there must be obstacles (barriers to entry) that prevent new firms from entering and competing. Looks for companies that have a moat a barrier to entry that prevents other firms from competing away its profits. Key features: each firm is a price taker and faces a perfectly elastic demand curve at market price, the number of firms is fixed in the short run, but can vary in the long run.