This chapter discussed firms' decisions in competitive markets. A market is competitive if it is a price taker, there are many buyers and sellers in the market, and the good they produce is largely the same. Firms in cometitve markets want to maximize profit, which can be found at the intersection of the price (which is interchangeable with average revenue and marginal value in a competitive market) and marginal cost. If the marginal cost is greater than the marginal revenue (price, AR), then the firm should decrease its output. If MC>P, then the firm should increase its output to reach profit-maximizing level.
The chapter also discussed the idea of shutdowns and exits, which I thought was interneting. A shutdown is a short run decision where firms still have to pay for fixed costs. An exit is a long run decision where no costs are paid.
Some things that were a bit unclear: When one is trying to find maximizing profit levels on a table, can one either look at profit OR compare marginal cost or revenue? Also how is this a characteristic of perfectly competitive markets: "firms can freely enter or exit a market?"
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