That should qualify is as follows :1. Buyers and sellers , they are price takers
2. Number of firm are very much
3. There is no barrier to entry
4. Perfect information
5. It produces identic product. Either the buyer or the seller , they will be informed that the items available in the markets.
The definition of Supply and Perfect Competition
Supply is a set of quantity supplied to the markets with different price levels. When firms operates in perfectly competition, supply curve is shown by short term MC curve is available in top of AVC (on top of shut down point). Shutdown Point is a condition when that if the process is run, the company will not make a profit but also do not cause any harm. If the firm operates at capacity under Shutdown Point will be loss.
Demand Curves for the Firm and the Industry
Demand curve which is faced by firm is different from industry demand curve.
The firm's demand which is perfectly competitive that is perfectly elastic.
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