ECON101 Study Guide - Final Guide: Price Fixing, Deadweight Loss, Competitive Equilibrium
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ECON101 Full Course Notes
A model of market structure where the force of competition is extreme and firms have no market power. Assumptions include many firms; identical products; many buyers; free entry; no advantages for existing firms over new firms; complete information. Industry demand is large relative to the minimum efficient scale of a firm (smallest quantity of output yielding minimum lrac long run average cost curve: products of each firm are identical. In perfect composition: each firm is a price taker, each firm faces a perfectly elastic demand curve at the market place. The perfectly competitive firm"s supply curve is its mc curve above minimum avc. Output, price, and profit in the short run. Short-run industry supply curve is the horizontal sum of individual firm"s supply curves. In the short run, the number of firms and their plant size are fixed. Equilibrium market p and q are determined by industry demand and supply curves. Output, price, and profit in the long run.