Ensayo De Economia

Perfect Competition.
Perfect competition is the world of price-takers. A perfectly competitive firm sells a homogeneous product (one identical to the product sold by others in the industry). It isso small relative to its market that it cannot affect the market price; it simply takes the price as given. When farmer smith sells homogeneous products like wheat, she sells to a large pool of buyersat the market price of $3 per bushel. Just as consumers must generally accept the prices that are charged by internet access providers or movie the alters, so must competitive firms accept the marketprices of the wheat or oil that they produce. We can depict a price- taking perfect competitor by examining the way demand curve (the DD curve) an demand curve facing a single competitive firm (the ddcurve). Because a competitive industry is populated by firms that are small relative to the market, the firm's segment of de demand curve is only a tiny segment of the industry`s curve. Graphicallythe competitive firm`s portion of the demand curve is so small that, to the Lilliputian eye of the perfect competitor, the firm`s dd demand curve looks completely horizontal or infinitely elastic.The industry demand curve on the left shows inelastic demand at competitive equilibrium at A. However, the perfect competitor on the right sells to such a tiny part of the market thatdemand looks completely horizontal (i.e., perfectly elastic). The perfect competitor can sell all it wants at the market price. Because competitivefirms cannot affect the price the price for each unit sold is the extra revenue that the firm will earn. For example, at a market price of $40 per unit the competitive firm can sell all it wants at$40. If it decides to sell 101 units rather than 100 units, its revenue goes up by exactly $40. 1.under perfect competition there are many small firms, each producing an identical product and each...