U7-Perfect Competition Barron's

when do all firms achieve profit-maximizing output?

when MR = MC

when do all firms achieve allocative efficiency?

when Demand = MC

how much profit do perfectly competitive firms get in the long run?

normal profit

what is normal profit?

zero economic profit

main characteristic of perfect competition

easily enter and exit market, no influence on price, price takers

what is the demand curve for perfect competition

perfectly elastic demand curve

name of perfectly competitive demand curve

MR. Demand AverageRevenue Price

if price < ATC but larger than AVC, then firm will...

stay in short run, exit long run

if price is < AVC, then firm will

exit immediately

the demand curve for a perfectly-competitive firm’s product is always

straight/horizontal/perfectly elastic

why is the demand for a perfectly competitive firm’s product like what it is?

because perfectly competitive firms are price takers, so the demand curve is always horizontal

when the AP Microeconomics test asks for demand curve, especially with perfectly competitive markets…

you should be careful to read whether if the demand curve is referring to the firm’s or the market’s