After reading this chapter, you should be able to

12.1 Define a perfectly competitive market.

12.2 Describe and explain why a perfectly competitive firm faces a horizontal firm demand curve.

12.3 Describe and explain how price and output are determined in a perfectly competitive market.

12.4 Describe and explain short-run economic profits and losses.

12.5 Explain why firms may enter and exit the market.

12.6 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.