Course: Principles of Microeconomics (ECON 1) · Silver Oak University (fictional sample) · Prof. Kessler
Focus: Perfect Competition — the Price-Taking Firm · Objective 6 · SLO A & B

📋 Module Overview Page — "Start Here" (Canvas: Page, published)

Week 10 — Perfect Competition

Now that you know how firms build up their costs (Week 9), you're ready for the payoff: how does a competitive firm decide what to produce — and whether to produce at all? This week you meet the perfectly competitive firm, economics' benchmark model of a market that works as well as a market can. Here the firm is a price taker — it has no market power, so the market price is its revenue signal, and it adjusts output until the last unit's price just covers its marginal cost.

The big question: If a firm can't control the price it receives, how does it decide how much to make — and when is it better to shut down than keep losing money?

By the end of this week, you can:

• explain what it means for a firm to be a price taker and why P = MR in perfect competition;
• find the profit-maximizing output where P = MC (on the rising arm of the MC curve);
• compute profit or loss using the formula (P − ATC) × Q;
• apply the shutdown rule: operate if P ≥ min AVC; shut down in the short run if P < min AVC;
• explain why long-run equilibrium drives economic profit to zero through entry and exit.

Do this, in order:

1. Read & watch — the Week 10 resources (≈40 min). → Readings & Resources page
2. Lecture Tutorial — work through the price-taking firm, P = MC, profit, and the shutdown rule with your AI tutor (≈45 min). Due Sun, Nov 8. → submit the chat share link + summary
3. Practice Exercises — 6 quick reps, ungraded (≈15 min).
4. Quiz 10 — 10 questions, closed to AI (≈20 min). Due Sun, Nov 8.
5. Discussion 10 — "Is perfect competition a realistic model — and is it still useful?" Initial post Fri, Nov 6, replies Sun, Nov 8.
6. Assignment 10 — the perfect-competition problem set (100 pts). Due Sun, Nov 8.
7. Workshop 10 — Graph & Model Workshop — use the cost schedule to find profit-maximizing output, compute profit/loss, and apply the shutdown rule (50 pts). Due Sun, Nov 8.

A note before you start: the P = MC rule sounds mechanical, but its logic is deep — you produce as long as the next unit adds more revenue than it costs, and you stop exactly when those two are equal. Every firm rule in the next three weeks is a variation on that same marginal idea.

📣 Welcome Announcement (Canvas: Announcement; available_from_offset_days = 0 — posts Mon, Nov 2)

Subject: Week 10 — the price-taking firm and the shutdown question 👋

Hi everyone,

Here's a thought experiment to kick off the week: imagine you run a small wheat farm and the market price of wheat just fell — hard. Do you keep producing? Shut down? Does it depend on how much you've already spent?

This week, economics gives you a precise answer. The perfectly competitive firm is a price taker — it cannot set the price, so it focuses entirely on one question: how much output maximizes profit (or minimizes loss) at the going market price? The answer is the P = MC rule, and the shutdown question has a crisp condition built right into the cost curves you learned last week.

This week, don't miss:

• Why P = MR for a price taker (and why that's the special feature of perfect competition, not monopoly).
• The profit or loss rectangle — (P − ATC) × Q — drawn on the cost diagram.
• The shutdown rule — operate if P ≥ min AVC, even at a loss; close in the short run only if P < min AVC.
• The long-run zero-profit result — the mechanism that keeps competitive markets efficient.

Start with the Module Overview ("Start Here"), then the readings, then your AI Lecture Tutorial. The cost table from last week travels with us — if you know your ATC and AVC, you already have everything you need.

See you in class,
Prof. Kessler