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Firms in a perfectly competitive market are said to be 鈥減rice takers鈥濃�攖hat is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?

Explain how the profit-maximizing rule of setting P = MC leads a perfectly competitive market to be allocatively efficient.

A single firm in a perfectly competitive market is relatively small compared to the rest of the market. What does this mean? How 鈥渟mall鈥� is 鈥渟mall鈥�?

What are the four basic assumptions of perfect competition? Explain in words what they imply for a perfectly competitive firm.

What is a 鈥減rice taker鈥� firm?

How does a perfectly competitive firm decide what price to charge?

What prevents a perfectly competitive firm from seeking higher profits by increasing the price that it charges?

How does a perfectly competitive firm calculate total revenue?

Briefly explain the reason for the shape of a marginal revenue curve for a perfectly competitive firm.

What two rules does a perfectly competitive firm apply to determine its profit-maximizing quantity of output?