3.3 Perfect Competition

A decrease in average total cost as output increases

An increase in average total cost as output increases

Constant average total cost regardless of output

A decrease in total cost as output decreases

3 bushels

4 bushels

5 bushels

6 bushels

Many buyers and sellers

High barriers to entry

Standardized products

Perfect information

price-maker

price-faker

price-shaker

$2

$12

$18

$0

Supply shifts left, price increases

Supply shifts right, price decreases

Demand shifts right, price increases

Demand shifts left, price decreases

It is the firm's marginal cost curve above the minimum average variable cost.

It is the firm's average total cost curve above the minimum average variable cost.

It is the firm's marginal cost curve below the minimum average variable cost.

It is the firm's average variable cost curve above the minimum average total cost.

Market price equals break-even price

Existing producers make zero economic profit

There is incentive for entry and exit

Industry output is at its highest

Both price and profit rise

Price rises but profit falls

Both price and profit fall

Price falls but profit rises

The price of grapes fell

The price of grapes rose

Wine consumption decreased

Grape production fell by 20%

positive

negative

excess

A technological advance lowers the fixed cost of production of every firm in the industry.

The wages paid to workers in the industry go up for an extended period of time.

A permanent change in consumer tastes increases demand for the good.

The price of a key input rises due to a long-term shortage of that input.