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.