Chapter 10

Perfect Competition

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 ...

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