Interactive simulator
Perfect Competition Simulator
In perfect competition, each firm is a price taker: the market sets the price and the firm chooses the quantity where price equals marginal cost. This simulator shows the firm's MC and ATC curves against a horizontal price line. Raise or lower the market price and watch profit (or loss) change; push price below minimum AVC and the firm shuts down in the short run. In this release this page is powered by the closest available interactive widget; a dedicated widget for this topic is planned.
Equilibrium solves Qd = Qs, so P* = (a − c) ÷ (b + d). Shifting demand changes a; shifting supply changes c. A ceiling only bites when set below P* (creating a shortage); a floor only bites when set above P* (creating a surplus).
How to use it
Set the market price with the slider.
Find the profit-maximizing quantity where P = MC.
Compute profit as (P - ATC) x Q.
Lower the price below minimum AVC to see the shutdown point.
What you will learn
- Explain the P = MC profit-maximization rule.
- Distinguish the shutdown point from the break-even point.
- Explain why long-run economic profit is zero under perfect competition.
Model notes
Perfect competition assumptions (identical products, free entry, perfect information) rarely hold exactly; the model shows the logic of the benchmark case. Long-run entry dynamics are described, not animated.