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Edexcel IAL Economics · WEC13
Unit 3WEC13

Business Behaviour
theory of the firm decoded

Complete revision notes for Unit 3. Business objectives, revenue and cost analysis, market structures, labour markets and government intervention — the theory of the firm from first principles.

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3.3.3 — Market Structures
🔑 Key idea
In perfect competition firms are price takers earning normal profit in the long run; a monopolist is a price maker earning supernormal profit — the trade-off is efficiency vs innovation.
Perfect competition — many firms, homogeneous product, no barriers to entry.
Monopoly — single seller, high barriers, potential for deadweight loss.
Entry barriers fall
New firms enter
Supernormal profit eroded
Normal profit in LR
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Unit overview

What you need to know for WEC13

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Diagrams drive marks
MC/AC/AR/MR for every market structure. Draw them accurately and label them clearly — diagrams are the backbone of Unit 3 answers.
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MC = MR is universal
The profit maximisation condition applies in every market structure. Understand why firms produce where MC = MR and you can tackle any question.
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Static vs dynamic efficiency
The big trade-off in evaluation. Monopolies may be allocatively inefficient but can achieve dynamic efficiency through supernormal profits funding R&D.
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Contestability changes everything
Focus on barriers to entry and sunk costs, not firm count. A market with few firms can still behave competitively if the threat of entry is credible.
Exam paper info

WEC13 at a glance

Assessment details
Exam paperWEC13
Duration1 hour 30 minutes
Total marks80 marks
% of A-Level20%
Question types4820
Data responseYes — Section A
Essay questionsSection B — choose 1 of 2
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