in perfect competition, why does the marginal cost curve shift

The barriers to entry are low, so it is easy for other firms to get into or out of the market. We also assume that there is perfect information, meaning everyone knows what price is being charged in all markets. Since the number of firms is very large, no one firm can influence the market price, thus each firm has no market power and each is a price taker. In the perfect or pure competition market, there are a large number of firms each producing the same product (as called a standardized or homogeneous product). When examining the structure of a market, we focus on the differentiating characteristics: number of firms, type of product, ease of entry, and market power or price control. In between the two extremes are most businesses, which fall into the categories of monopolist competition and oligopolies. While few businesses are actually at either extreme, it is useful to look at the two extremes for comparison purposes. You can think of businesses being on a continuum with one extreme being perfect competition to the other extreme being monopolies. In the next few sections we will discuss four different market structures and their behavior.

How consumers view a particular product or service influences the market power and behavior of a business or producer. But if you asked them what brand of flour, milk, or eggs they purchase, the answer might be, I don’t know, I just buy whatever is cheapest. If you asked someone what brand of cars or shoes they purchase, it is likely that they could tell you the brand name. Think of the different products or services that are purchased.

In perfect competition, why does the marginal cost curve shift