.
Analysis of perfect competition.
wPerfect competitor is a “price taker.”
nFaces a perfectly horizontal demand curve.
$/q
q/t
P1
AC
d1
MC
q*
wChooses quantity q* so that MR = MC.
nFor perfect competitor, P = MR.
wIf P > AC at q*, firm makes a profit.
nIn the short run, when no new firms can enter.
nAn economic profit.
nMarshall: quasi-rents.
 Π = (P1 – AC)q*