Firms & Market Structures is a core part of IB Economics. Revise the key concepts and common mistakes below, then lock them in with the free games.
Key concepts
MonopolySingle seller, high barriers to entry
MR < PMarginal revenue under price
Profit maxOutput where MR = MC
Deadweight lossWelfare lost from under-production
Natural monopolyLRAC falls over whole demand
X-inefficiencyCost slack from lack of competition
Price discriminationDifferent prices for same product
First degreeCharge each buyer max WTP
Second degreePrice by quantity (bulk discount)
Third degreePrice by group (student, senior)
Necessary conditionPricing power + no resale + segmentable
WTPWillingness to pay
Kinked demandSweezy 1939 — sticky oligopoly price
Elastic aboveRivals don't match price rise
Common mistakes to avoid
Questions where students often pick the tempting wrong answer — make sure you know the right one:
According to the law of demand, what happens as price rises?✗ Demand rises with price. ✓ Quantity demanded usually falls.
What does a change in a good's own price cause?✗ A shift of the whole demand curve. ✓ A movement ALONG the demand curve.
What is market equilibrium?✗ Where supply is at its highest. ✓ Where quantity demanded equals quantity supplied.
What is opportunity cost?✗ Only the money price of an item. ✓ The next best alternative given up when you make a choice.
Practise Firms & Market Structures — free games
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