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Perfect Competition
Daniela Camargo Sanchez
Created on October 18, 2025
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Transcript
Perfect Competition
price Taker/Maker and Demand Curve for a Firm
Characteristics of Perfect Competition
In perfect competition, individual firms are price takers. The market sets the price, and firms face a perfectly elastic curve at that price. THEY ARE NOT THE PRICE MAKERS.
1. Many buyers and sellers - no one is in control of the market price 2. All market participants know the prices/products 3. Similar products This is what separates perfect competition from other markets.
Real World Examples & Conclusion
Profit Maximization
In the short run, firms in perfect competition produce where MC = MR, which equals the market price. Examples: 1. Agricultural Markets 2. Fish Markets 3Raw Material Markets
Firms in perfect competition maximize their profits by producing where MC equals MR. MC = MR = That's where profit will peak!