The Indifference Principle Price searching or monopoly models . In the short run, ignore fixed costs, because they are irrelevant. The only relevant costs are marginal costs, costs that vary with your decision to produce more or less.
Price taking is synonymous with competition.
In the competitive model, a firm's marginal cost curve is its supply curve. P, then the firm's marginal cost curve becomes the firm level supply curve. In other words, given any price, you can tell how much the firm will produce by looking at its marginal cost curve. Add up all the firm level supply curves to derive the industry level supply curve. This means that the firm is earning economic profits.