After studying this chapter, you should be able to understand:
- A market is a place, where the buyers and the sellers of a good are in close contact with each other, where the contact may be direct or indirect.
- Under perfect competition, the firm does not have any discretion in fixing the price of the good.
- A perfectly competitive firm is in equilibrium at the point, where MR = MC and also the marginal cost curve intersects the marginal revenue curve from below.
- A perfectly competitive firm is in the long-run equilibrium when it is earning normal profits.
- Minimum price policies aim at keeping the market price above the equilibrium price.
- Maximum price policies aim at keeping the market price below the equilibrium ...