Chapter 2: The Firm and Industry Organization

In this section

• Cost Structures, Breakeven, and Shutdown Points
  Learn how firms analyze fixed and variable costs, find their breakeven points, and determine the shutdown condition to optimize profitability and strategic market decisions.
• Short-Run and Long-Run Cost Curves
  Explore the distinction between short-run and long-run cost curves, economies of scale, diseconomies of scale, and constant returns to scale. Learn how these cost curves factor into capacity planning, production decisions, and technology-driven efficiency improvements.
• Perfect Competition
  Explore how firms operate under perfect competition, focusing on short-run and long-run equilibrium, profit conditions, efficiency implications, and real-world applications.
• Monopolistic Competition
  Explore how differentiated goods, brand loyalty, and strategic pricing define monopolistic competition, including short-run supernormal profits, long-run normal profits, and the role of excess capacity and advertising.
• Oligopoly (Strategic Interaction and Game Theory)
  Discover how a handful of large firms shape markets through strategic interaction, game theory, and potential collusion while managing competition in oligopolistic industries.
• Monopoly and Market Power
  Discover how monopolies form, operate, and influence markets, while exploring the pricing and welfare implications of a single, powerful market participant.
• Efficiency and Welfare Implications of Different Market Structures
  Explore how different market structures—perfect competition, monopolistic competition, oligopoly, and monopoly—affect allocative, productive, and dynamic efficiency, as well as overall social welfare and policy interventions.
• Industry Concentration and Market Measures
  Explore key metrics for assessing market concentration, including Concentration Ratios and the Herfindahl-Hirschman Index, and learn how they inform strategic and regulatory decisions.
• Price Discrimination in Market Structures
  Explore how firms maximize profits through price discrimination, the conditions for successful segmentation, real-world examples, and ethical considerations.
• Natural Monopoly and Regulation
  Explore the nature of natural monopolies, their emergence in markets such as utilities and infrastructure, and how regulation balances efficiency, price setting, and consumer protection.
• Managerial and Behavioral Theories of the Firm
  A thorough exploration of neoclassical, managerial, and behavioral approaches to firm objectives, highlighting real-world complexities such as principal-agent conflicts, governance mechanisms, and bounded rationality.