In pure competition, prices are determined solely by market forces of supply and demand. Individual firms have no control over the price, so they are price takers. They must accept the market-determined price, making them highly price-sensitive.

In pure competition, prices are determined by the interaction of supply and demand in the market. Individual firms have no control over the price of their product. They take the prevailing market price as given and adjust their quantity supplied accordingly. This means they are "price takers."

New firms can freely enter and existing firms can freely leave purely competitive industries. No significant legal, technological, financial, or other obstacles prohibit new firms from selling their output in a competitive market.

Purely competitive businesses create standardized goods. Customers don't mind which seller they buy from as long as the price is the same.

Total revenue from the sale of a product divided by the quantity of the product sold (demanded; equal to the price at which the product is sold when all units of the product are sold at the same price

The total number of dollars received by a firm (or firms) from the sale of a product; equal to the total expenditures for the product produced by the firm (or firms); equal to the quantity sold (demanded) multiplied by the price at which it is sold.

The total number of dollars received by a firm (or firms) from the sale of a product; equal to the total expenditures for the product produced by the firm (or firms); equal to the quantity sold (demanded) multiplied by the price at which it is sold

break-even point occurs where total cost catches up with total revenue,

technology shifts supply curve downwards,indicates increase in supply

wages will shift supply curve upwards, indicates decrease in supply

(1) Should we produce this product? (2) If so, in what amount? (3) What economic profit (or loss) will we realize?

in the long run, firms in pure competition achieve a state of equilibrium where they earn only normal profit. Normal profit covers all costs, including opportunity costs for the owner's time and capital. Economic profit, which is above normal profit, attracts new firms into the market, driving down prices until only normal profit remains.

Increasing-cost Industry
An industry in which expansion through the entry of new firms raises the pricesthat firms in the industry must pay for resources and therefore increases their production costs.

decreasing-cost Industry
An industry in which expansion through the entry of firms lowers the prices that firms in the industry must pay for resources and therefore decreases their production costs.

Constant-cost Industry:An industry in which the entry and exit of firms have no effect on the prices that firms in the industry must pay for resources and thus no effect on production costs.

Consumer surplus:The difference between the maximum price a consumer is (or consumers are) willing to pay for an additional unit of a product and its market price; the triangular area below the demand curve and above the market price.

productive efficlency
The production of a good in the least costly way; occurs when production takes place at the output level at which per-unit production costs are minimized.

allocative efficlency
The apportionment of resources among firms and industries to obtain the production of the products most wanted by society (consumers); the output of each product at which its marginal cost and marginal benefit are equal, and at which the sum of consumer surplus and producer surplus is maximized.

Producer surplus:The difference between the actual price a producer receives (or producers receive and the minimum acceptable price; the triangular area above the supply curve and below the market price.

examples include: Local utilities (e.g., water, electricity),Patented pharmaceutical drugs,Natural monopolies (e.g., tap water in a remote area)

In a pure, or absolute, monopoly, a single firm is the sole producer of a specific good or the sole supplier of a service; the firm and the industry are synonymous

The pure monopolist controls the total quantity supplied and thus has considerable control over price; it is a pricemaker

The product produced by a pure monopolist may be either standardized or differentiated. Monopolists that have standardized products engage mainly in public relations advertising, whereas those with differentiated products sometimes advertise their products attributes.

Economies of Scale: Monopolies often achieve significant economies of scale, meaning their average costs decrease as they produce more. New entrants would need to match or surpass the monopolist's production levels to be competitive, which can be financially challenging.

Network Effects: In certain markets, the value of a product or service increases as more people use it. Social media platforms and telecommunications networks are examples. Established networks have a significant advantage, as new entrants struggle to attract users.

Legal Barriers: Monopolies can be protected by legal barriers such as patents, copyrights, and trademarks. Patents, for example, grant exclusive rights to produce a specific product or use a particular technology for a set period, preventing others from entering the market with the same product.

Ownership or Control of Essential Resources:A monopolist can use private property as an obstacle to potential rivals

Pricing and Other Strategic Barriers to Entry:Even if a firm is not protected from entry by, say, extensive economies of scale or ownership of essential resources, entry may effectively be blocked by the way the monopolist responds to attempts by rivals to enter the industry.

marginal revenue is less than price:With a fixed downward sloping demand curve, the pure monopolist can increase sales only by charging a lower price. its MR curve lies below its demand curve

The Monopolist Is a Price-maker:
All imperfect competitors, whether pure monopolists, oligopolists, or monopolistic competitors, face downward sloping demand curves.
As a result, any change in quantity produced causes a movement along their respective demand curves and a change in the price they can charge. Firms with downward sloping demand curves are thus pricemakers

the monopolist sets prices in the elastic region of demand : the aim of this is to maximize profit

Recall that MR equals P in pure competition and that the supply curve of a purely competitive firm is determined by applying the MR (= P) = MC profit-maximizing rule. At any specific market-determined price, the purely competitive seller will maximize profit by supplying the quantity at which MC is equal to that price. When the market price increases or decreases, the competitive firm adjusts its output. Each market price is thus associated with a specific output, and all such price-output pairs define the supply curve. This supply curve turns out to be the portion of the firm's MC curve that lies above the AVC curve

Not Highest Price
Because a monopolist can manipulate output and price, people often believe it will charge the highest price possible. That is incorrect.
There are many prices above Pm, but the monopolist shuns them because they yield a smaller-than-maximum total profit. The monopolist seeks maximum total profit, not maximum price.

Total, Not Unit, Profit
The monopolist seeks maximum total profit, not maximum unit profit

Possibility of Losses by Monopolist
The likelihood of economic profit is greater for a pure monopolist than for a pure competitor. In the long run, the pure competitor is destined to have only a normal profit, whereas barriers to entry mean that any economic profit realized by the monopolist can persist. pure monopoly, there are no new entrants to increase supply, drive down price, and eliminate economic profit.

The production of output, whatever its level, at a higher average (and total) cost than is necessary for producing that level of output.

Attempts by individuals, firms, or unions to use political influence to receive payments in excess of the minimum amount they would normally be willing to accept to provide a particular good or service.

Where economies of scale are extensive, market demand may not be sufficient to support a large number of competing firms, each producing at minimum efficient scale. In such cases, an industry of one or two firms would have a lower average total cost than would the same industry made up of numerous competitive firms. At the extreme, only a single firm- natural monopoly-might be able to achieve the lowest long-run average total cost.

In the very long run, firms can reduce their costs through the discovery and implementation of new technology. If monopolists are more likely than competitive producers to develop more efficient production techniques over time, then the inefficiency of monopoly might be overstated.

price-output combination results in both productive efficiency and allocative efficiency. Productive efficiency is achieved because free entry and exit force firms to operate where ATC is at a minimum. The sum of the minimum-ATC outputs of the 1,000 pure competitors is the industry output, c. Product price is at the lowest level consistent with minimum average total cost.
The allocative efficiency of pure competition results because production occurs up to the output at which price (the measure of a product's value or marginal benefit to society) equals marginal cost (the worth of the alternative products forgone by society in producing any given commodity). In short: P = MC = minimum ATC.

The trade-off faced by a regulatory agency in setting the maximum legal price a monopolist may charge:
The socially optimal price is below average total cost (and either bankrupts the firm or requires that it be subsidized), while the higher, fair-return price does not produce allocative efficiency.

The price of a product that results in the most efficient allocation of an economy's resources and that is equal to the marginal cost of the product.