* The firm produces the output at which marginal revenue (price) equals marginal cost .
* If price is less than minimum average variable cost, the firm temporarily shuts down.
* A firm's supply curve is the upward-sloping part of its marginal cost curve above minimum average variable cost.
* An industry supply curve shows the sum of the quantities supplied by each firm at each price.
2.Output,Price,and Profit in Perfect Competition
* Market demand and supply determine price.
* The firm produces the output at which price equals marginal cost.
* In the short run, a firm can make an economic profit,incur an economic loss,or break even.
* Economic profit induces entry. Ecomonic loss induces exit.
* Entry and plant expansion increase supply and lower price and profit.Exit and plant contraction decrease supply and raise price and profit.
* In long-run equilibrium, economic profit is zero.There is no entry,exit ,or change in plant size.
3.Changing Tastes and Advancing Technology
* A permanent decrease in demand leads to a smaller industry output and a smaller number of firms.
* A permanent increase in demand leads to a larger industry output and a larger number of firms.
* The long-run effect of a change in demend on price depends on whether there are external economies (price falls)of external diseconomies(price rises)or neither(price remains constant).
* New technologies increase supply and in the long run lower the price and increase the quantity.
4.Competition and Efficiency
* Resources are used efficiently when we produce goods and services in the quantities that people value most highly.
* When there are no external benefits and external costs,perfect competition achieves an efficient allocation.Marginal benefit equals marginal cost and the sum of consumer surplus and producer surplus is maximized.
*The existence of monopoly,public goods, and external costs and external benefits are obstacles to efficiency.