Microeconomics - Chapter 12: Firms in Perfectly Competitive Markets

In recent years, the demand for healthier food has increased. Many people have begun buying organically grown fruits and vegetables at farmers’ markets. Lured by higher profits, increasing numbers of farmers began participating in these markets. But the additional supply of produce has forced down prices and reduced profits. Many farmers have found that the profits they earn from selling in farmers’ markets are no longer higher than what they earn by selling to supermarkets.
A perfectly competitive market meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market. Firms in perfectly competitive market are unable to affect the prices of the goods they sell and are unable earn economic profits in the long run.