Learning Objectives

  1. Define a perfectly competitive market.
  2. Describe and explain why a perfectly competitive firm faces a horizontal firm demand curve.
  3. Describe and explain how price and output are determined in a perfectly competitive market.
  4. Describe and explain short-run economic profits and losses.
  5. Explain why firms may enter and exit the market.
  6. Describe and explain how the shape of the long-run supply curve depends on the extent to which input costs change with the entry or exit of firms in the industry.