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 list the features of a perfectly competitive market and explain why they leave each firm with no market power. (Guide: “What makes a market perfectly competitive”)
- I can explain why a price-taking firm’s demand curve is horizontal and why P = MR = AR = d. (Guide: “The price taker’s demand curve”; Practice Q1)
- I can explain how prices signal marginal cost to buyers and marginal benefit to sellers, and give both a reason to act. (Guide: “Long-run equilibrium and efficiency”; Practice Q6)
- I can explain why long-run equilibrium is allocatively efficient (P = MC) and productively efficient (P = minimum ATC). (Guide: “Long-run equilibrium and efficiency”; Practice Q6)
Calculation and graphing
- I can find the profit-maximising output from a cost table using MC = MR = P. (Guide: Worked example 1; Practice Q4)
- I can calculate economic profit or loss as TR − TC or (P − ATC) × q, using ATC at the chosen output. (Guide: Worked example 1; Practice Q2, Q4)
- I can find the long-run price and the number of firms from minimum ATC and market demand. (Guide: Worked example 2; Practice Q7)
- I can draw side-by-side market and firm graphs with a shared price axis, showing short-run profit or loss as a shaded rectangle. (Guide: Figure 1; Practice Q5)
- I can draw a firm in long-run equilibrium where P = MR = MC = minimum ATC. (Guide: Figure 2; Practice Q5)
Reasoning
- I can explain how short-run profits lead to entry and losses lead to exit, and what this does to market supply, price, firm output and the number of firms. (Guide: “From short run to long run”; Practice Q5)
- I can decide whether a loss-making firm should keep producing in the short run by comparing P with AVC. (Guide: Worked example 1(b); Practice Q2, Q5)
- I can compare long-run supply and long-run price in constant-cost, increasing-cost and decreasing-cost industries. (Guide: Figure 3; Practice Q3, Q7)
All ticked? Move on to Topic 4.1, the introduction to imperfectly competitive markets, or return to the course roadmap.