2/12/2024 0 Comments When firms exit a perfectly competitive industry, the market supply curve shifts to the left.![]() ![]() ![]() It implies that the firm faces a perfectly elastic demand curve for its product: buyers are willing to buy any number of units of output from the firm at the market price. This is already determined in the profit equation, and so the perfectly competitive firm can sell any number of units at exactly the same price. Since a perfectly competitive firm must accept the price for its output as determined by the product’s market demand and supply, it cannot choose the price it charges. To understand why this is so, consider a different way of writing out the basic definition of profit: Determine the price at which a firm should continue producing in the short runĪ perfectly competitive firm has only one major decision to make-namely, what quantity to produce.Identify profits and losses with the average cost curve.Calculate profits by comparing total revenue and total cost.By the end of this section, you will be able to: ![]()
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