I had this debate with my AP Econ teacher today... Yes, i'm a high school student, but I've outdone him in economics from time to time before. He showed us a chart with two separate curves for Average Total Cost and Average Variable Cost, for a firm competing in a perfectly competitive industry. I told him that a perfectly competing firm (which, keep in mind, is a totally hypothetical thing) could not possibly have a single cent of fixed costs - that would be a barrier to entry into the Industry... Albeit a small one. It discourages individuals from starting firms in that industry, which in turn compromises everything that the theory of perfect competition stands for. He told me that all firms have fixed costs, and I told him that no real firms compete competitively... And at that point he sounded pretty unsure. I thought it was a flat-out fact that perfectly competing firms paid no fixed costs whatsoever... But now I'm a bit confused. Anybody care to clarify?