When firms exit a perfectly competitive industry, the market supply curve shifts to the left.9/2/2023 ![]() This implies that a factor's price equals the factor's marginal revenue product. In perfect competition, any profit-maximizing producer faces a market price equal to its marginal cost (P = MC). Such markets are allocatively efficient, as output will always occur where marginal cost is equal to average revenue i.e.Perfect competition provides both allocative efficiency and productive efficiency: This equilibrium would be a Pareto optimum. In theoretical models where conditions of perfect competition hold, it has been demonstrated that a market will reach an equilibrium in which the quantity supplied for every product or service, including labor, equals the quantity demanded at the current price. ![]() In economics, specifically general equilibrium theory, a perfect market, also known as an atomistic market, is defined by several idealizing conditions, collectively called perfect competition, or atomistic competition. ![]()
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