Perfect Competition Market Structure

     In perfect competition there are many buyers and many sellers at the same time. This market structure is also known as price taker because the price of the goods and services itself cannot be influenced by a perfect competition firm. Not only that but this market structure only sells homogenous goods.

        In the diagram above, the firm in the perfect competition is going through an economic lost due to the total revenue is less than the total cost. This will affect the average revenue less than the average cost. Thus, the price is less than the average cost. 

 

   In the diagram above, firm is going thru a normal profit. Total revenue is equals to total cost which will also make the average revenue equals to average cost. Therefore, price is equals to average cost.

 

     In the diagram above, firm is going thru an economic profit. Total revenue is more than total cost which will also make the average revenue more than average cost. Therefore, price is more than average cost.