Markets produce goods and services, but not all markets are the same. The way in which firms within the same market interact and behave is usually a function of how many firms there are in that market, the type of products that are being produced, and how easy it is for new firms to enter the market. This chapter provides the beginnings of a framework for several theories of market structures by reintroducing the most competitive market structure, that of perfect competition.
After completing this chapter, the student should be able to:
1. List and explain the key assumptions of perfect competition.
2. Understand the difference between accounting and economic profit.
3. Use the rule for profit maximization ...