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Competitive Analysis

A perfectly competitive firm produces quantity where P=MC

At this quantity the P is established by Qs = Qd

The demand curve represents a series of consumer equilibrium

(Demand is consistent with representing the consumer marginal benefits)

In perfect competition, we get...

Marginal Benefit Consumption = Marginal Cost Production

(Market is allocatively efficient)


Producers Surplus

Is the amount that they are paid for a commodity less than the price they are willing to accept it

Producer surplus is shown by the area under the price line above the MC curve or Supply curve

Producer surplus is a measure of the BENEFITS OF PRODUCING