In perfect competition market structure, Firms & Industry cannot increase sell because goods are identical.

1. INDUSTRY & FIRM UNDER
PERFECT COMPETITION
• The concept of a market is central to the understanding of the determination of
price & quantity of output of a commodity under consideration. Because in
modern economy, it is mainly produced to sell to consumers for some other
goods & services. In all these activities, each good is demanded & supplied
against money. And this gives rise to an arrangement known as the Market.
• The term market may refer to that of a single good or a bunch of goods.
• e.g.market of milk, petroleum market etc.

2. P E R F E C T
C O M P E T I T I O N
All goods are identical.
Many buyer s and seller s.
There are no barrier s to entr y/exit.
Buyer s & seller s have per fect
information .

3. Short-run equilibrium of industry and
firm under perfect competition

4. Positive profit
• The ATC must be less than the price,
so that calculated profit is positive.

5. Zero economic profit
• ATC must be equal to the price
so that calculated profit will be zero.

6. Short run shut down point

7. Conditions for equilibrium
in Perfect Competition
• MR ≥ MC. Marginal cost curve should cut marginal
Revenue curve from below
• AR ≥ AVC

8. Long-run equilibrium of the firm
under perfect competition
AR = MR
DL
(SR)AC
(SR)MC