Section+1-+Microeconomics-+HL+Theory+of+the+Firm

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The //theory// of the firm is a key Higher Level section of the unit on Microeconomics. Although it is theoretical in name, it is highly applicable to the real world in gaining an understanding of how businesses behave (and how governments react) in markets with different levels of competition (different market structures).

Before you begin analysing the various types of market structures it is important that you gain a **SOLID** understanding of cost, revenue and profit theory. (Please don't confuse revenue with profit from now on!!)

__ Cost theory __

 * [[file:Short run costs.doc]]
 * [[file:Combining the Factors of Production.docx]]
 * [[file:Combining the factors of production-graph.pdf]]
 * Quantitative analysis: Test your understanding :[[file:HL Paper 3 sample question.pdf]]
 * [[file:Econ of scale - intro ex.pdf]]
 * [[file:5. long run costs of production.doc]]

Test your understanding on cost theory:

__ Revenue Theory __

 * [[file:Business revenue theory.doc]]

__ Profit Theory __

 * [[file:7. HL determining profit.doc]]

__ Market Structures __




__Market Structures 1: Perfect Competition__
A perfectly competitive market is, as the name suggests, the perfect market structure as the structure results in the most efficient price level for consumers. However, it is often regarded as a purely theoretical structure with a number of markets displaying similiar but not exact characteristics of the market.


 * [[file:Perfect Competition - 2014.docx]]
 * [[file:Perfect competition- an evaluation.docx]]
 * Mjfoodies take on perfect competition
 * Further your understanding: [[file:PerfectCompetitionPractice-1.pdf]]
 * Quantitative analysis
 * [[file:4a. Quantitative analysis.docx]]
 * [[file:4b. Quantitative analysis-answers.docx]]
 * [[file:5. Perfect comp- further quantitative analysis.pdf]]

__ Market Structures 2: Monopoly __
A //pure// monopoly occupies the other extreme end of the spectrum relative to perfect competition in terms of number of competitors (ONE) and degree of competition (NONE ). What is of more interest to economists when studying the behaviour of firms is not the actual number of firms in the market but whether one firm is in a position of **market (or monopoly) power**. **Barriers to entry** play a key role in determining the long term behaviour of firms in a monopoly and also determine how **contestable** a market is.

Be aware, that even though monopolists are often criticised for their inefficiency and uncompetitive behaviour, they can be necessary (as in the case of a natural monopoly) or can have objectives other than profit maximisation


 * [[file:Monopoly & business decisions.pdf]]
 * [[file:HL monopoly.doc]]
 * The case for natural monopolies: [[file:Natural Monopolies- student.docx]]
 * An evaluation of monopolies:[[file:HL Advantages and disadvantages of a monopoly.docx]]
 * mjfoodie- monopoly
 * Quantitative analysis: [[file:Monopoly Quantitative Analysis exercises.docx]]
 * Test your understanding:

__ Market Structures 3: Monopolistic Competition __
Monopolistic Competition is often referred to as imperfect competition as it shares similar characteristics to those of perfect competition. You should be able to apply market structures to real markets and provide examples on a local, national and global scale. The first class activity is designed to help you do this.


 * [[file:Monopolistic Competition- student notes.pdf]]
 * mjfoodies take on monopolistic competition

__ Market Structures 4: Oligopolies __
Oligopolies are anything but standard. Some markets may have only a few firms, others may have many. The products on offer in an oligopoly may be homogeneous, e.g. cement or differentiated, e.g. motor vehicles, breakfast cereals. What is of key importance is that the market must be dominated by just a few firms that may or may not require regulation depending on their behaviour.
 * Introduction to market dominance:[[file:Logos-brands worksheet.doc]] & [[file:oligoply brands.doc]]
 * [[file:HL oligopoly.doc]]
 * A game to illustrate interdependence:[[file:oligopoly_game.doc]]
 * Tension in a legal oil cartel
 * mjfoodie- oligopoly

__ Price discrimination __

 * [[file:HL price discrimination 2013.doc]]
 * [|Disney considers price discrimination at its theme parks]
 * How technology enables personalised prices

__Market Structures: A summary and comparison__

 * [[file:HL Comparisons of Market Structures.doc]]
 * [[file:3. Market structures -comparisons.xlsx]]
 * [[file:Market structures- comparison table.docx]]
 * [[file:4. Market Structures economic efficiency and regulation.doc]]

__ Market Structures: Assessment practice __

 * [[file:Revision- market structures.pdf]]
 * [[file:Revision- costs, revenue & profit.pdf]]

Document for revision- Market structures- Multiple Choice- Answers : Answers:
 * Extended response questions: [[file:Test 2013.docx]]
 * [[file:Test 2013 answer Q1.pdf]]
 * [[file:Test 2013 answer Q2.pdf]]
 * [[file:Test 2013 answer Q3.pdf]]

Test 2015: Answers: