Chapter 2: The Firm and Industry Organization

In this section

• Cost Structures, Breakeven, and Shutdown Points
  Cost Structures, Breakeven, and Shutdown Points (CFA Level 1): Distinguishing Fixed and Variable Costs, Total, Average, and Marginal Costs, and Breakeven Analysis. Key definitions, formulas, and exam tips.
• Short-Run and Long-Run Cost Curves
  Short-Run and Long-Run Cost Curves (CFA Level 1): Background and Context, Key Principles of Short-Run Cost Curves, and Fixed and Variable Inputs in the Short Run. Key definitions, formulas, and exam tips.
• Perfect Competition
  Perfect Competition (CFA Level 1): Basic Characteristics, Short-Run Equilibrium, and Price = Marginal Cost. Exam-focused explanations with key terms and takeaways.
• Monopolistic Competition
  Monopolistic Competition (CFA Level 1): Core Features of Monopolistic Competition, Short-Run Equilibrium, and Long-Run Equilibrium and Excess Capacity. Key definitions, formulas, and exam tips.
• Oligopoly (Strategic Interaction and Game Theory)
  Oligopoly (Strategic Interaction and Game Theory) (CFA Level 1): Key Characteristics of Oligopolies, Strategic Interaction and Game Theory, and Rationale for Game Theory. Key definitions, formulas, and exam tips.
• Monopoly and Market Power
  Monopoly and Market Power (CFA Level 1): Key Characteristics of a Monopoly, Single Seller and Unique Product, and Barriers to Entry. Key definitions, formulas, and exam tips.
• Efficiency and Welfare Implications of Different Market Structures
  Efficiency and Welfare Implications of Different Market Structures (CFA Level 1): Market Structures and Efficiency, Perfect Competition, and Monopolistic Competition. Key definitions, formulas, and exam tips.
• Industry Concentration and Market Measures
  Industry Concentration and Market Measures (CFA Level 1): Key Measures of Industry Concentration, Concentration Ratios (CRn), and Herfindahl-Hirschman Index (HHI). Key definitions, formulas, and exam tips.
• Price Discrimination in Market Structures
  Price Discrimination in Market Structures (CFA Level 1): Key Principles of Price Discrimination, First-Degree (Perfect) Price Discrimination, and Second-Degree (Quantity-Based or Menu Pricing). Key definitions, formulas, and exam tips.
• Natural Monopoly and Regulation
  Natural Monopoly and Regulation (CFA Level 1): Defining a Natural Monopoly, Cost Structures Behind Natural Monopoly, and Anecdote: The “Extra” Subway Track. Key definitions, formulas, and exam tips.
• Managerial and Behavioral Theories of the Firm
  Managerial and Behavioral Theories of the Firm (CFA Level 1): Traditional View vs. Managerial Theories, Baumol’s Revenue-Maximization Hypothesis, and Marris’s Growth-Maximization Model. Key definitions, formulas, and exam tips.