2.3 Theory of the Firm

This is a Higher Level topic only.

Cost theory    
Types of costs: fixed costs, variable costs (distinction between short-run and long-run)    
Total, average and marginal costs    
Accounting cost + opportunity cost = economic cost    
 Short-run    
Law of diminishing returns 1 http://opengecko.com/economics/output-or-product-in-the-short-run/
Total product, average product, marginal product 1 http://opengecko.com/economics/output-or-product-in-the-short-run/
Short-run cost curves 2 http://opengecko.com/economics/short-run-cost-curves/
Long-run    
Economies of scale   http://opengecko.com/economics/the-long-run-cost-curves-economies-and-diseconomies/
Diseconomies of scale   http://opengecko.com/economics/the-long-run-cost-curves-economies-and-diseconomies/
Long-run cost curves   http://opengecko.com/economics/the-long-run-cost-curves-economies-and-diseconomies/
Revenues    
Total revenue 3 http://opengecko.com/economics/revenues-total-marginal-and-average/
Marginal revenue 3 http://opengecko.com/economics/revenues-total-marginal-and-average/
Average revenue 3 http://opengecko.com/economics/revenues-total-marginal-and-average/
Profit    
Distinction between normal (zero) and supernormal (abnormal) profit 4 http://opengecko.com/economics/profit/
Profit maximization in terms of total revenue and total costs, and in terms of marginal
revenue and marginal cost
4 http://opengecko.com/economics/profit/
Profit maximization assumed to be the main goal of firms but other goals exist (sales volume maximization, revenue maximization, environmental concerns) 4 http://opengecko.com/economics/profit/
Perfect competition 6 http://opengecko.com/economics/perfect-competition/
Assumptions of the model 6 http://opengecko.com/economics/perfect-competition/
Demand curve facing the industry and the firm in perfect competition 6 http://opengecko.com/economics/perfect-competition/
Profit-maximizing level of output and price in the short-run and long-run 6 http://opengecko.com/economics/perfect-competition/
The possibility of abnormal profits/losses in the short-run and normal profits in the long-run 6 http://opengecko.com/economics/perfect-competition/
Shut-down price, break-even price 6 http://opengecko.com/economics/perfect-competition/
Definitions of allocative and productive (technical) efficiency 6 http://opengecko.com/economics/perfect-competition/
Efficiency in perfect competition 6 http://opengecko.com/economics/perfect-competition/
Monopoly    
Assumptions of the model 7 http://opengecko.com/economics/monopoly/
Sources of monopoly power/barriers to entry 7 http://opengecko.com/economics/monopoly/
Natural monopoly 7 http://opengecko.com/economics/monopoly/
Demand curve facing the monopolist 7 http://opengecko.com/economics/monopoly/
Profit-maximizing level of output 7 http://opengecko.com/economics/monopoly/
Advantages and disadvantages of monopoly in comparison with perfect competition 7 http://opengecko.com/economics/monopoly/
Efficiency in monopoly 7 http://opengecko.com/economics/monopoly/
Monopolistic competition    
Assumptions of the model 8 http://opengecko.com/economics/monopolistic-competition/
Short-run and long-run equilibrium 8 http://opengecko.com/economics/monopolistic-competition/
Product differentiation 8 http://opengecko.com/economics/monopolistic-competition/
Efficiency in monopolistic competition 8 http://opengecko.com/economics/monopolistic-competition/
Oligopoly  
Assumptions of the model 9 http://opengecko.com/economics/oligopoly/
Collusive and non-collusive oligopoly 9 http://opengecko.com/economics/oligopoly/
Cartels 9 http://opengecko.com/economics/oligopoly/
Kinked demand curve as one model to describe interdependent behaviour 9 http://opengecko.com/economics/oligopoly/
Importance of non-price competition 9 http://opengecko.com/economics/oligopoly/
Theory of contestable markets 9 http://opengecko.com/economics/oligopoly/
Price discrimination  
Definition 10 http://opengecko.com/economics/price-discrimination/
Reasons for price discrimination 10 http://opengecko.com/economics/price-discrimination/
Necessary conditions for the practice of price discrimination 10 http://opengecko.com/economics/price-discrimination/
Possible advantages to either the producer or the consumer 10 http://opengecko.com/economics/price-discrimination/
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