1. Mr. Bammel

2. Very Large Numbers: independently acting sellers often at national levels of market; Standardized Product: Identical (consumers are indifferent to who they buy from) “Price Takers:” sellers have NO control over the price (no seller can change price, will result in shrinking profits) Free Entry and Exit: no legal, technological or financial obstacles exist; Pure Competition Characteristics

3. Seller must accept price determined by the market; So, for an individual firm, the demand schedule will be perfectly elastic along the market price; The firm cannot increase or decrease price: Increase will drive buyers away Decrease will not make more of profit Demand of a Purely Competitive Seller

4. Average Revenue (per unit) will be Price received by the seller for the product; Marginal Revenue is the extra revenue brought in from each successive unit, so basically it will be the same as the price as well. Total Revenue will be equal to your price times your quantity the firm can sell. In pure competition, P = AR = MR; Revenue in Pure Competition

5. Purely competitive Firm’s Demand and Revenue Curves

6. A firm will maximize profits comparing TR to TC by finding the gap between the two which will be the greatest; Profit Maximization: Total Revenue vs. Total Cost

7. As long as MR > MC, produce (will be making a profit); When MC > MR, do not produce (now, losing profits); In the short run, the firm will maximize profit or minimize loss by producing the output at which marginal revenue equals marginal cost (as long as producing is preferable to shutting down); If it is a fraction (which it usually is), then produce last complete unit; Can be restated as P = MC when applied to purely competitive firms; Profit Maximization: Marginal Revenue vs. Marginal Cost

8. Each of you will be placed in a group of 4 in order to examine all of the graphs associated with Pure competition in the short run. Your group will be responsible for drawing the graph and then examining and explaining the components of that graph. Be sure to use all crucial information when creating your graph (don’t just copy the graph and be done…you need more). Divide your paper up into 4 sections and provide a title for each based off the names below Graphs: 1.Short-run profit-maximizing in a purely competitive market (Page 443) 2.Short-run loss-minimizing position in a purely competitive market (Page 444) 3.Short-run shutdown position in a purely competitive market (Page 446) 4.Short-run supply curve in a purely competitive market (Page 447) Groups

9. Step 1: each person in the group read and completely understand one of the following graphs. Step 2: Each person will explain their graph to the rest of their group and as they explain another group member will place that information in the appropriate square. Step 3: Be sure each graph and explanation are clearly written and provide all the information for understanding how these topics are displayed on the purely Competitive graph in the short run.