Mini lessons / Microeconomics / 3.7
3.7 Perfect competition: the side-by-side graph
Thousands of identical sellers, and not one of them gets to pick the price.
Step 1 of 4
What makes a market perfectly competitive
- Many buyers and sellers.
- Identical products.
- Easy entry and exit.
- Each firm is a price taker: it accepts the market price.
The market's supply and demand set the price. The firm can sell as much as it wants at that price, so the firm's demand curve is horizontal.
Key ideaFor a perfectly competitive firm: MR = D = AR = P. Say it fast: Mr. DARP.