Learning Objectives: Perfect Competition LO1: Distinguish among a firm, an industry, and a market LO2: Explain what is meant by perfect competition and the market system LO3: Use two approaches to explain how a firm might maximize its profits LO4: explain what is meant by break-even price and shutdown price CHAPTER 8 8-1© 2012 McGraw-Hill Ryerson Limited

Industry a group of producers Market the interaction of both producers and consumers Perfect Competition a market in which all buyers and sellers are price takers 8-2© 2012 McGraw-Hill Ryerson Limited LO1

8-3© 2012 McGraw-Hill Ryerson Limited LO1

Self-Test 8-4© 2012 McGraw-Hill Ryerson Limited In what type of market will you find the following types of firms/products? a)Hairdressing salons. b)Industrial chemicals in Canada. c)Commercial breweries in Canada. d)World market for coffee. e)Rogers Cable in Ontario. LO1

Increasing Cost Industry an industry in which the prices of resources and products both rise as the industry expands Decreasing Cost Industry an industry in which the prices of resources and products both fall as the industry expands Constant Cost Industry an industry in which the prices of resources and products remain unchanged as the industry expands 8-5© 2012 McGraw-Hill Ryerson Limited LO1