2.11.3 (HL)—Degrees of market power Topic Practice
2.11.3 (HL)—Degrees of market power Topic Practice
Students practise explaining short-run vs long-run outcomes for perfectly competitive firms—including profit, loss, shutdown, and efficiency—using diagrams and data.
How this is tested
- explain why long-run abnormal profit disappears as entry raises supply and lowers price
- test allocative efficiency with P equals MC, and productive efficiency at minimum ATC
- explain short-run production at a loss when price exceeds AVC on the firm diagram