Work through the list without notes. If you cannot do a statement, follow its link, then come back. Guide = study guide; Practice = practice questions.
Understanding
- I can explain why every input, and so every cost, is variable in the long run. (Guide: “Short run and long run”; Practice Q1, Q4(d))
- I can define increasing, constant and decreasing returns to scale. (Guide: “Returns to scale: when every input grows”; Practice Q2)
- I can explain how the LRATC curve relates to short-run average total cost curves for different plant sizes. (Guide: Figure 1)
- I can give causes of economies of scale and of diseconomies of scale. (Guide: “The shape of the LRATC curve”; Practice Q7(c))
Calculation and graphing
- I can identify returns to scale by comparing the percentage change in all inputs with the percentage change in output. (Guide: Worked example 1(b); Practice Q2, Q7(b))
- I can calculate LRATC from long-run total cost and output. (Guide: Worked example 1(a); Practice Q4)
- I can find the MES from a table or graph, including when the bottom of LRATC is flat. (Guide: Figure 2; Practice Q3, Q4(c))
- I can draw a labelled LRATC curve showing the three regions and the MES. (Practice Q5)
- I can show a change in input prices as a shift of LRATC. (Practice Q5(b))
Reasoning
- I can explain the difference between diseconomies of scale and diminishing marginal returns. (Guide: “The shape of the LRATC curve”; Practice Q7(a))
- I can use the MES and market size to estimate how many firms can reach the lowest cost. (Guide: Worked example 2; Practice Q6)
- I can explain why a large MES relative to demand tends to make a market more concentrated. (Guide: “Minimum efficient scale and market structure”; Practice Q6(b))
All ticked? Move on to Topic 3.4, Types of Profit, or return to the course roadmap.