Perfect competition–many firms, free entry, homogeneous products (HL)

Monopoly—single or dominant firm, high barriers to entry, no close substitutes (HL)

Unit 2: Microeconomics (HL)

Oligopoly—few large firms, high barriers to entry, interdependence (HL)

Monopolistic competition—many firms, free entry, product differentiation (HL)

Total revenue - Total costs (TR -TC) (HL)

Marginal cost = Marginal revenue (MC=MR) (HL)

Abnormal profit (AR > AC)* (HL)

Normal profit (AR = AC)* (HL)

Losses (AR < AC)* (HL)

Meaning of market power (HL)

Perfect competition—no market power —firm as price taker (HL)

Perfect competition—no market power —firm as price taker — profit maximization: (HL)

Perfect competition—no market power —firm as price taker — in the short run (HL)

Perfect competition—no market power —firm as price taker — in the long run (HL)

Perfect competition—no market power —firm as price taker — Meaning of allocative efficiency, necessary conditions (HL)

Perfect competition—no market power —firm as price taker — Imperfect competition—varying degrees of market power—firm as price maker (HL)

Profit maximization (HL)

Allocative inefficiency (market failure) (HL)

Welfare loss in a monopoly in comparison with perfect competition due to restricted output and higher price (HL)

Natural monopoly (HL)

Collusive versus non-collusive (HL)

Interdependence, risk of price war, incentive to collude, incentive to cheat (HL)

Allocative inefficiency (market failure) simple game theory payoff matrix (HL)

Price and non-price competition (HL)

Measurement of market concentration – concentration ratios Monopolistic competition (HL)

Profit maximization: (HL)

Profit maximization: — in the short run (HL)

Profit maximization: — in the long run (HL)

Less market power due to many substitutes—more elastic demand curve compared with monopoly (HL)

Allocative inefficiency (market failure) (HL)

Less inefficiency, more product variety (HL)

Economies of scale including natural monopolies (HL)

Abnormal profits may finance investments in research and development (R&D), hence innovation (HL)

Risks in terms of output, price, consumer choice (HL)

Legislation and regulation (HL)

Government ownership (HL)

Fines (HL)