I. Introduction
   A. A purely competitive market exists when the number of independently acting buyers and sellers is so large that 
        individual participants have no affect on market price and quantity.
   B. Products sold are virtually identical. Agricultural products such as potatoes and wheat are examples of 
        competitively sold products.
   C. Pure competition as defined is difficult to find because some monopoly power usually exists.
   D. Price is determined by the intersection of industry supply and demand.
   E. Individual firms are price takers as they inherit a horizontal demand/marginal revenue curve from their industry.
       1. A firm can not sell above market as products are identical and no one will buy higher than market.
       2. There is no reason to sell below market as it would mean less revenue and less profit.
       3. Profit Maximization (Short Run) for Price Takers—Flash Animation from K.K. Fung, Sri Harsha Kolar and Pavan Karnam, U. Memphis

 II. A Purely Competitive Company making a Profit

Profit Maximization for a Competitive Firm from Dennis Kaufman University of Wisconsin-Parkside.

 III. Purely competitive adjustment

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        A. Suppose industry demand and supply yield an equilibrium price P at which a firm's economic profit is zero.
            1. Step 1 indicates an increase in demand to D' causing economic profit.
            2. Market entry is relatively easy and this profit draws in new firms increasing supply to S'. Economic profit disappears.
            3. This automatic purely competitive adjustment causes equilibrium long run economic profit for pure competition to
                be zero.
       B. To many, zero long run economic profit represents an ideal economic model as all the company earns is a 
            normal return on investment.
       C. View a dynamic model of Market Equilibrium in the Long Run from by Dennis Kaufman University of Wisconsin-Parkside.

IV. Economic analysis of pure competition
      A. Competition is efficient.
           1. Price settles where long-run ATC is at its lowest point indicating goods are produced efficiently.
           2. P = MR = MC indicating that resources are allocated efficiently as the
               $'s spent by consumers (P) = the
               $'s received by producers (MR) = the
               $ cost of producers (MC) and
               economic profit is zero.
      B. Shortcomings
          1. Spillover costs (pollution) and benefits (education) aren't properly measured resulting in goods being 
              over and under produced.
              a. Government intervention was needed to lower automobile pollution.
              b. Governments supports education with grants and inexpensive loan problems to students and colleges.
          2. Monopoly power develops to negate Adam Smith's "invisible hand" of competition which is required 
              to assure that the purely competitive adjustment occurs.
          3. Eliminating economic profit makes it difficult for competitive firms to afford expensive R & D and technology.

 V. Competitive supply
      A. A firm's MC curve is its short-run supply curve.
      B. Industry supply is the horizontal summation of the firm's supply curves.

 VI. For a conservative view of competition Read Pure and Perfect" Competition? By What Standard? Part 5 in a Series
        of articles on Capitalism, Free-competition, Antitrust, and Microsoft, By Richard M. Salsman

VII. Other theories of the competitive model from Wikipedia.
       A. Bertrand competition
       B. Cournot competition requires calculus.

VIII. For a liberal view of competition read Planning and Markets: Hiser: I. Index and Introduction
         from Planning and Markets magazine.
 IX. Our Economics Learning Center has information for students, teachers, an professionals.