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

Long-run equilibrium in a perfectly competitive industry occurs after all firms have entered and exited the

industry and seller profits are driven to zero.

Perfect competition means that there are many sellers, there is easy entry and exiting of firms, products are

identical from one seller to another, and sellers are price takers.

8.2 How Perfectly Competitive Firms Make Output Decisions

As a perfectly competitive firm produces a greater quantity of output, its total revenue steadily increases at a

constant rate determined by the given market price. Profits will be highest (or losses will be smallest) at the

quantity of output where total revenues exceed total costs by the greatest amount (or where total revenues fall

short of total costs by the smallest amount). Alternatively, profits will be highest where marginal revenue,
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