perfect competition each firm faces many competitors that sell identical products

price taker a firm in a perfectly competitive market that must take the prevailing market price as given

shutdown point level of output where the marginal cost curve intersects the average variable cost curve at the

minimum point of AVC; if the price is below this point, the firm should shut down immediately

Key Concepts and Summary

8.1 Perfect Competition and Why It Matters

A perfectly competitive firm is a price taker, which means that it must accept the equilibrium price at which it

sells goods. If a perfectly competitive firm attempts to charge even a tiny amount more than the market price,

it will be unable to make any sales. In a perfectly competitive market there are thousands of sellers, easy entry,

and identical products. A short-run production period is when firms are producing with some fixed inputs.
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