Introduction: a scenario: three years after graduation, you run your own business, you must decide how much to produce, what price to charge, how, what factors should affect these decisions? many workers to hire, etc. How much competition you face: we begin by studying the behaviour of firms in perfectly competitive markets, characteristics of perfect competition, 1. The goods offered for sale are largely the same: 3. If shutdown in short run, must still pay fc. Shut down if p < avc: a competitive firm"s short-run supply curve, the irrelevance of sunk costs. > atc: the competitive firm"s supply curve, the firm"s long-run supply curve is the portion of its mc curve above. Lratc (long-run average total cost: market supply: assumptions, 1. All existing firms and potential entrants have identical costs: 2. Each firm"s costs do not change as other firms enter or exit the: 3. The number of firms in the market is: market.