Course Objectives for Chapter 12: Firms in Perfectly Competitive Markets


Students should be able to:

      Define a perfectly competitive market, and explain why a perfect competitor faces a horizontal demand curve.

      Explain how a perfect competitor decides how much to produce.

      Use graphs to show a firm's profit or loss.

      Explain why firms may shut down temporarily.

      Explain how entry and exit ensure that perfectly competitive firms earn zero economic profit in the long run.

      Explain how perfect competition leads to economic efficiency.