The document discusses perfect competition in markets. Under perfect competition, all firms produce identical products, are price takers, have small market shares, and provide full information to buyers. In the long run, perfect competition leads to economic efficiency as firms earn only normal profits and resources are optimally allocated. While low profits may limit investment, perfect competition benefits consumers through competitive pricing, product variety, and influence over prices. The authors argue that operating under perfect competition will help their on-campus business succeed when facing other competitors in the future.

1. Perfect Competition:
The Most Efficient Market
Dominic, Andrew, Connie, and Jessie

2. What Is Perfect Competition?
All firms...
• Sell an identical product
• Are price takers
• Have relatively small market share
• Let their buyers know everything about a
product/service
• Have the leisure of entering or exiting the
industry

3. What Is Our Business?
• On campus “lounge area”
• We keep down our costs
• Perfect competition pushes us to provide the best
possible service
• We compete against Cezar’s Kitchen
• We want to take a chunk of their market share

4. Perfect Competition:
Firm and Industry
• Movement of firm reflects movement of industry and vice versa
• The AR curve = MR curve
• Firms are price takers therefore, if one firm raises the price, consumers will
move to other firms
• Creates a horizontal constant curve and no marginal revenue
• AR = MR = Demand
• Demand shows how many consumers buy at varying prices, a mirror of
what AR shows

6. Supernormal (Abnormal) Profits
• Any profit above normal profit
• Short run
• Because “perfect”, other firms will be
able to sell for the same amount so
they would soon be able to sell at the
same price
• Long Run
• Normal profit
• Bring average cost curve back to
demand curve at normal profit
• This “perfect” nature creates efficiency

9. Loss in Perfect Competition
• Demand fall results in price fall
• Experiencing loss since AR < AC
• Reflects entire market
• As firms lose money, some firms leave the market
• Results in shift in supply curve

12. Downsides of Perfect
Competition
• Low profits for investment
• Not much product variety
• Externalities may cause problems
• Possible unequal distribution of goods &
income

13. Upsides of Perfect
Competition
• Optimal allocation of resources
• Competition gives incentive to work
harder
• Consumers have influence over prices
• Business responds to consumer wishes

14. “Our Success With Perfect Competition Will Help Us Succeed
In An Oligopolistic Market Structure”
What We Have Learned That Will Bring Us Success
• Competitive Pricing
• Lowest prices possible
• We compete
• Very fit, short term gain
• Abnormal profit gives incentive to
innovate

15. To Sum Things Up...
• “Perfect Competition”
• We are creating an on campus “lounging area”
• Movement of a firm reflects the movement of
the industry and vice versa
• Abnormal profits in the short run, normal
profits in the long run