CHAPTER OBJECTIVES

In this chapter, you will learn about:

• Perfect Competition and Why It Matters

• How Perfectly Competitive Firms Make Output Decisions

• Entry and Exit Decisions in the Long Run

• Efficiency in Perfectly Competitive Markets

Introduction to Perfect Competition

BRING IT HOME

A Dime a Dozen
When you were younger did you babysit, deliver papers, or mow the lawn for money? If so, you faced stiff

competition from many other competitors who offered identical services. There was nothing to stop others from

also offering their services.

All of you charged the “going rate.” If you tried to charge more, your customers would simply buy from someone

else. These conditions are very similar to the conditions agricultural growers face.
188 8 • Perfect Competition

Growing a crop may be more difficult to start than a babysitting or lawn mowing service, but growers face the same
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