Describe what will happen and why to the firm’s costs and profits as the firm makes its choices. Emphasize why each type of individual cost does or does not change as the firm changes its level of production.
A
In a perfect competition market a firm has only one major decision to make which is the amount of output need to be produced by the firm. Since in a perfect competition market the price of the product is determined by the market's demand and supply, here the firm does not have any role to play in determining the price of the product. A perfect competition market has demand for the good is infinetly elastic therefore there isn't any any restrictions in supply whatever may be the supply of the firms in a perfect competition market it would not effect its price, so firms can sell any number of units at exactly same price.
When in a perfectly competitive market the firm chooses the amount of quantity to be produced then this quantity along with the prices prevailing in the market for outputs and inputs will determine the firm's total revenue' total costs and finally the level of profits.
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