Micro Foundations · intro
What moves on the Perfect Competition (Firm) diagram
A price takerprice takerA participant too small to influence the market price, it can only choose quantity. re-optimizes where P = MC; a higher price means more output and short-run profit.
The firm takes the market price as given.
Industry demand pushes the market price up, the firm's flat P=MR line jumps.
It expands along MC until MC equals the new price; the profit box appears.
Examiners ask this as: market price rises, firm expands, price taker profit.
Other scenarios on Perfect Competition (Firm)