Chapter Outline

9.1 Market Structure and Firm Behaviour

9.2 The Theory of Perfect Competition

9.3 Short-Run Decisions

9.4 Long-Run Decisions

AFTER STUDYING THIS CHAPTER YOU WILL BE ABLE TO

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 Learning Objectives (LO)

1. distinguish between competitive behaviour and a competitive

market.

2. list the four key assumptions of the theory of perfect competition.

3. derive a competitive firm’s supply curve.

4. determine whether competitive firms are making profits or losses

in the short run.

5. explain the role played by profits, entry, and exit in determining a

competitive industry’s long-run equilibrium.