AP Microeconomics / Unit 3: Production, Cost, and the Perfect Competition Model
3.7 Perfect Competition
Notes
Many firms, identical products, free entry and exit; firms are price takers ($P=MR$).
- Short run: profit or loss possible. Long run: $P=\min ATC$, zero economic profit.
- Productively efficient ($P=\min ATC$) and allocatively efficient ($P=MC$).
Practice
A perfectly competitive firm's demand curve is:
Price taker.
In long-run equilibrium, a perfectly competitive firm earns:
Entry and exit.
Allocative efficiency means:
Value equals marginal cost.
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