What is a competitive market: the meaning of competition. Sometimes called a perfectly competitive market, has 2 characteristics: many buyers and sellers, goods offered are largely the same, firms can freely enter/exit market. Buyers and sellers are price takers, they must accept the market price: the revenue of a competitive firm. Average revenue: total revenue divided by quantity sold. Average revenue = price of the good. Marginal revenue: change in total revenue from additional unit sold, marginal revenue = price of good for competitive firms. Profit maximization and the competitive firm"s supply curve: the marginal cost curve and the firm"s supply decision. Firm maximizes profit by producing the quantity at which marginal cost = marginal revenue. If marginal revenue is greater than marginal cost, the firm should increase output. If marginal cost is greater than marginal revenue, firm should decrease output.