Characteristics of Perfect Competition
The Price Taker's Demand Curve
The MARKET determines equilibrium price through S and D
Individual firm takes market price as given — faces horizontal D curve
Short-Run Profit Maximization
Case 1: Economic Profit ($P > ATC$)
Case 2: Normal Profit ($P = ATC$)
Case 3: Economic Loss ($AVC < P < ATC$)
Case 4: Shutdown ($P < AVC$)
The Firm's Supply Curve
Short-Run Market Equilibrium
Revenue Relationships
Key Graphs You Must Draw
Examples of Perfectly Competitive Markets
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AP Exam Tips
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Common Mistakes
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Unit 3 topics
Unit 3 overview3.1The Production Function3.2Short-Run Production Costs3.3Long-Run Production Costs3.4Types of Profit3.5Profit Maximization3.6Firms' Short-Run Decisions to Produce and Long-Run Decisions to Enter or Exit3.7Perfect Competition3.8Long-Run Equilibrium and Efficiency in Perfect Competition