1. Prof. Ana Corrales ECO 2023 Notes Ch. 23: Pure Competition Characteristics & Occurrence  Presence of a large number of independently acting sellers  Firms produce a standardized product. Therefore, as long as the price is the same, consumers are indifferent about which seller to buy from  Individual firms have NO control over product price = “price taker”  New firms can freely enter and existing firms can freely exit the industry

2. Prof. Ana Corrales ECO 2023 Notes Demand as Seen by a Purely Competitive Seller The demand curve of the competitive firm is perfectly elastic (E d = ∞) Because the purely competitive seller is a “price taker”, the going market price (P) is the demand curve (D) for that good or service  The market price is given The Demand & Revenue Schedules for a Purely Competitive Firm (Table 23.2, Fig 23.1)  Because a purely competitive firm can sell additional units of output at the market price, its MR curve coincides with its perfectly elastic demand curve  In pure competition, P = MR  Marginal Revenue = change in total revenue (extra revenue) resulting from selling one more unit of output

3. Prof. Ana Corrales ECO 2023 Notes Marginal Cost & Short-Run Supply The segment of the firm’s MC curve that lies above the AVC curve is its SR supply curve (Fig 23.6) The horizontal sum of all the firms’ individual supply curves determines the industry supply curve (Fig 23.7)

4. Prof. Ana Corrales ECO 2023 Notes Pure Competition and Efficiency The final L-R equilibrium position of all firms will have the same characteristics relating to economic efficiency Price will settle where it is equal to the minimum ATC Since the MC curve intersects the ATC curve at its minimum point, MC = minimum ATC Fig 23.12

5. Prof. Ana Corrales ECO 2023 Notes Ch. 23 Study Questions 1 3 (complete Table + b)