There is a set of market conditions which are assumed to prevail in the discussion of what perfect competition might be if it were theoretically possible to ever obtain such perfect market conditions. These conditions include:

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In a perfect market the sellers operate at zero economic surplus: sellers make a level of return on investment known as normal profits.
Normal profit is a

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In a perfectly competitive market, the demand curve facing a firm is perfectly elastic.
As mentioned above, the

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In the short run, a firm operating at a loss [R < TC (revenue less than total cost) or P < ATC (price less than unit cost)] must decide whether to continue to operate or temporarily shut down. The shutdown rule states "in the short run a firm should continue to operate if

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The use of the assumption of perfect competition as the foundation of price theoryfor product markets is often criticized as representing

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Equilibrium in perfect competition is the point where market demands will be equal to market supply. A firm's price will be determined at this point.

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The short-run (SR) supply curve for a perfectly competitive firm is the marginal cost (MC) curve at and above the shutdown point. Portions of the marginal cost curve below the

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