Perfect competition
For a perfectly competitive firm, the marginal cost of producing an extra unit of output is shown using the MC curve (in blue) whereas the average total cost of producing an extra unit of output is shown using the ATC curve (in red). As stated above, a perfectly competitive market has a large number of buyers and sellers and the demand does not change with output. Hence, the demand curve, the average revenue and marginal revenue curves are horizontal (in green). The point in which the demand curve intersects the vertical axis is the price of the product sold by the firm.