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26012 Analyse the behaviour and performance of firms in different market structures

NZQA Expiring unit standard	26012 version 3
	Page 4 of 4

Title	Analyse the behaviour and performance of firms in different market structures
Level	5	Credits	6

Purpose

People credited with this unit standard are able to: analyse the behaviour of the short-run costs of production, and the relationship between cost and production in the long-run, using economic principles; explain the behaviour of firms operating under perfect competition, under monopoly market structure, under a monopolistically competitive market structure, and under an oligopolistic market structure; and evaluate the performance of firms under different market structures.

Classification

Economic Theory and Practice > Micro Economics

Available grade

Achieved

Guidance Information

1 Definition

Equilibrium of the firm is that output level which maximises profit (given by the condition MR = MC).

2 References

Callander, Andrew, Understanding the Economic Environment, 2nd (or subsequent) ed. (Wellington: Lexis Nexis, 2004).

Stewart, James, Rankin, Keith, Economic Concepts and Applications: The Contemporary New Zealand Environment, 4th (or subsequent) ed. (Auckland: Pearson, 2008).

Outcomes and performance criteria

Outcome 1

Analyse the behaviour of the short-run costs of production using economic principles.

Range economic costs includes – accounting costs, opportunity costs;

short-run costs includes – variable cost, fixed cost, average total cost, marginal cost.

Performance criteria

1.1 The analysis is illustrated by means of a graphical depiction consistent with cost data.

1.2 The analysis accounts for the inter relationships between output and costs in terms of the law of diminishing returns and production capacity.

Outcome 2

Analyse the relationship between cost and production in the long-run using economic principles.

Performance criteria

2.1 The analysis establishes the shape of the long-run average costs curve, consistent with least-cost production decisions.

Range one of – graphical, numerical economies of scale, diseconomies of scale.

Outcome 3

Explain the behaviour of firms operating under perfect competition.

Performance criteria

3.1 The explanation highlights the features of a perfectly competitive market structure.

Range number of firms, product differentiation, control over price, extent of market information, freedom of entry.

3.2 The explanation determines the short-run equilibrium of the firm consistent with the profit maximisation condition.

Range one of – graphical, numerical, algebraic;

one of – profit – normal, subnormal, supernormal.

3.3 The explanation predicts the long-run profit outcomes for the firm consistent with profit maximising behaviour and industry equilibrium price movements.

Range one of – short-run supernormal profit resulting in long-run normal profit, short-run subnormal profit resulting in long-run normal profit.

Outcome 4

Explain the behaviour of firms operating under monopoly market structure.

Performance criteria

4.1 The explanation highlights the features of a monopoly market structure.

Range number of firms, product differentiation, control over price, extent of market information, freedom of entry.

4.2 The explanation determines short-run and long-run equilibrium of the firm, consistent with the profit maximisation objective.

Range one of – graphical, numerical, algebraic;

one of – profit – normal, subnormal, supernormal.

4.3 The explanation assesses the behaviour of monopoly in terms of its market power.

Range market power – barriers to entry, product differentiation, price discrimination.

Outcome 5

Explain the behaviour of firms operating under a monopolistically competitive market structure.

Performance criteria

5.1 The explanation highlights the features of a monopolistically competitive market structure.

Range number of firms, product differentiation, control over price, extent of market information, freedom of entry.

5.2 The explanation determines short-run and long-run equilibrium of the firm, consistent with the profit maximisation objective.

Range one of – graphical, numerical, algebraic;

one of – profit – normal, subnormal, supernormal.

Outcome 6

Explain the behaviour of firms operating under an oligopolistic market structure.

Performance criteria

6.1 The explanation highlights the features of an oligopolistic market structure.

Range number of firms, product differentiation, control over price, extent of market information, freedom of entry.

6.2 Oligopoly behaviour is explained in terms of the market structure.

Range price – interdependence, price leadership, price followership, kinked demand curve model;

behaviour – advertising, output, product differentiation.

Outcome 7

Evaluate the performance of firms under different market structures.

Performance criteria

7.1 The evaluation assesses the performance of market structures.

Range two of – perfect competition, monopoly, oligopoly, monopolistic competition;

two of – allocative efficiency, productive efficiency, quantity produced, price, research and development, innovation, consumer choice.

7.2 The evaluation describes a contemporary example of government regulation restricting the market power of firms.

Replacement information

This unit standard replaced unit standard 8412, unit standard 8413, and unit standard 8414.

This unit standard is expiring. Assessment against the standard must take place by the last date for assessment set out below.

Status information and last date for assessment for superseded versions

Process	Version	Date	Last Date for Assessment
Registration	1	16 October 2009	31 December 2021
Rollover and Revision	2	16 April 2015	31 December 2021
Review	3	27 June 2019	31 December 2021

Consent and Moderation Requirements (CMR) reference

0116

This CMR can be accessed at http://www.nzqa.govt.nz/framework/search/index.do.

NZQA National Qualifications Services

SSB Code 130301

Ó New Zealand Qualifications Authority 2022

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