CFA PROGRAM 2026 LEVEL I, VOLUME 2 – MACROECONOMICS & INTERNATIONAL TRADE NOTES –
COMPLETE EXAM REVIEW MATERIAL A+ ALREADY GRADED (2026-2027)
1. perfectly competitive Market Characteristics: 1) No control over price
2) perfectly elastic, horizontal demand curve
3) marginal revenue (MR) and
the price of its product are identical
4) average revenue (AR) or revenue per unit, is also equal to price per unit.
2. total revenue (TR) perfectly competitive: TR (as always) is equal to price times quantity
TR = (P)(Q).
3. imperfect competition Market Characteristics: 1) Pricing Control
2)
4. total revenue (TR) imperfect competition: price is a function of quantity
P = f(Q)
TR = f(Q) × Q
5. Perfectly Competitive Firm Demand Curve
TR & P:
6. Imperfectly Competitive Firm
TR & P:
7. Economic costs: sum of total accounting costs
and implicit opportunity costs
8. Sunk costs: must be ignored in the decision to continue to operate in the short run
, CFA PROGRAM 2026 LEVEL I, VOLUME 2 – MACROECONOMICS & INTERNATIONAL TRADE NOTES –
COMPLETE EXAM REVIEW MATERIAL A+ ALREADY GRADED (2026-2027)
9. Shutdown decision (Short Term): when total revenue is below total variable costs
Would shutdown in the long run
10. breakeven point: ATC point (Bottom of vertex)
11. shutdown point: AVC point (Bottom of vertex)
When TR cannot cover TVC
When Marginal Revenue is less than or equal to Average variable costs
12. TR = TC: Short-Run Decision: Stay in the Market
Long-Term Decision: Stay in the Market
13. TR = TVC but < TC: Short-Run Decision: Stay in the Market
Long-Term Decision: Exit market
14. TR < TVC: Short-Run Decision: Shut down production
Long-Term Decision: Exit market
15. Short Term Assumptions: at least one of the
factors of production is Fixed
16. Long Term Assumptions: all factors of production are
variable
17. short-run total cost Inclusions: all the inputs—labor and capital—the firm is using to produce
output
18. Economies of scale: occur when the firm increases its output and cost per unit of pr oduction falls
LRAC curve with a negative slope
19. Diseconomies of scale: occur if cost per unit rises as output increases
LRAC curve with a positive slope
20. increasing returns to scale: when a production process allows
for increases in output that are proportionately larger than the increase in inputs
, CFA PROGRAM 2026 LEVEL I, VOLUME 2 – MACROECONOMICS & INTERNATIONAL TRADE NOTES –
COMPLETE EXAM REVIEW MATERIAL A+ ALREADY GRADED (2026-2027)
21. decreasing returns to scale: when a production process leads to increases in output that are
proportionately smaller than the increase in
inputs.
22. Factors that can lead to diseconomies of scale:
23. Factors that can lead to economies of scale: + Obtaining discounted pri ces on resources
when buying in larger quantities
24. minimum efficient scale: The minimum point on the LRAC curve
optimal firm size under perfect competition over the long run
25. short-term breakeven point: price is equal to average total cost
26. perfect competition: Many Sellers
Homogeneous/ Standardized Products
Low Barriers to Entry
No Pricing Power
No Non-price Competition
27. Monopolistic competition: Many Sellers
Ditterentiated Products
Low Barriers to Entry
Sone Pricing Power
Advertising and product ditterentiation
Factors That Determine Market Structure:
28.
29. oligopoly: Few Sellers
Homogeneous/ Standardized Products
, CFA Program 2026 Level I, Volume 2
Study online at https://quizlet.com/_i6j6pk
High Barriers to Entry
Some or Considerable Pricing Power
Advertising and product ditterentiation
30. Pure monopoly: One Seller
Unique Product
Very High Barriers to Entry
Considerable Pricing Power
Avertising Non-Price Competition
31. price takers: When the market dictates the price based on aggregate supply and demand conditions
NO PRICING POWER
32. When differentiation is critical: Non-price competition dominates
33. Porter's
five forces: Threat of entry;
Power of suppliers;
Power of buyers (customers);
Threat of substitutes; and
Rivalry among existing competitors
34. The most distinctive factor in monopolistic competition: product ditterentiation
35. Total Revenue Calc from Graph: Total revenue is the area of the rectangle P1 × Q1
36. Optimal Price and Output in Monopolistically Competitive Markets: In the short
run, the profit-maximizing choice is the level of output at which MR =
MC and total revenue is the area of the rectangle P1 × Q1
COMPLETE EXAM REVIEW MATERIAL A+ ALREADY GRADED (2026-2027)
1. perfectly competitive Market Characteristics: 1) No control over price
2) perfectly elastic, horizontal demand curve
3) marginal revenue (MR) and
the price of its product are identical
4) average revenue (AR) or revenue per unit, is also equal to price per unit.
2. total revenue (TR) perfectly competitive: TR (as always) is equal to price times quantity
TR = (P)(Q).
3. imperfect competition Market Characteristics: 1) Pricing Control
2)
4. total revenue (TR) imperfect competition: price is a function of quantity
P = f(Q)
TR = f(Q) × Q
5. Perfectly Competitive Firm Demand Curve
TR & P:
6. Imperfectly Competitive Firm
TR & P:
7. Economic costs: sum of total accounting costs
and implicit opportunity costs
8. Sunk costs: must be ignored in the decision to continue to operate in the short run
, CFA PROGRAM 2026 LEVEL I, VOLUME 2 – MACROECONOMICS & INTERNATIONAL TRADE NOTES –
COMPLETE EXAM REVIEW MATERIAL A+ ALREADY GRADED (2026-2027)
9. Shutdown decision (Short Term): when total revenue is below total variable costs
Would shutdown in the long run
10. breakeven point: ATC point (Bottom of vertex)
11. shutdown point: AVC point (Bottom of vertex)
When TR cannot cover TVC
When Marginal Revenue is less than or equal to Average variable costs
12. TR = TC: Short-Run Decision: Stay in the Market
Long-Term Decision: Stay in the Market
13. TR = TVC but < TC: Short-Run Decision: Stay in the Market
Long-Term Decision: Exit market
14. TR < TVC: Short-Run Decision: Shut down production
Long-Term Decision: Exit market
15. Short Term Assumptions: at least one of the
factors of production is Fixed
16. Long Term Assumptions: all factors of production are
variable
17. short-run total cost Inclusions: all the inputs—labor and capital—the firm is using to produce
output
18. Economies of scale: occur when the firm increases its output and cost per unit of pr oduction falls
LRAC curve with a negative slope
19. Diseconomies of scale: occur if cost per unit rises as output increases
LRAC curve with a positive slope
20. increasing returns to scale: when a production process allows
for increases in output that are proportionately larger than the increase in inputs
, CFA PROGRAM 2026 LEVEL I, VOLUME 2 – MACROECONOMICS & INTERNATIONAL TRADE NOTES –
COMPLETE EXAM REVIEW MATERIAL A+ ALREADY GRADED (2026-2027)
21. decreasing returns to scale: when a production process leads to increases in output that are
proportionately smaller than the increase in
inputs.
22. Factors that can lead to diseconomies of scale:
23. Factors that can lead to economies of scale: + Obtaining discounted pri ces on resources
when buying in larger quantities
24. minimum efficient scale: The minimum point on the LRAC curve
optimal firm size under perfect competition over the long run
25. short-term breakeven point: price is equal to average total cost
26. perfect competition: Many Sellers
Homogeneous/ Standardized Products
Low Barriers to Entry
No Pricing Power
No Non-price Competition
27. Monopolistic competition: Many Sellers
Ditterentiated Products
Low Barriers to Entry
Sone Pricing Power
Advertising and product ditterentiation
Factors That Determine Market Structure:
28.
29. oligopoly: Few Sellers
Homogeneous/ Standardized Products
, CFA Program 2026 Level I, Volume 2
Study online at https://quizlet.com/_i6j6pk
High Barriers to Entry
Some or Considerable Pricing Power
Advertising and product ditterentiation
30. Pure monopoly: One Seller
Unique Product
Very High Barriers to Entry
Considerable Pricing Power
Avertising Non-Price Competition
31. price takers: When the market dictates the price based on aggregate supply and demand conditions
NO PRICING POWER
32. When differentiation is critical: Non-price competition dominates
33. Porter's
five forces: Threat of entry;
Power of suppliers;
Power of buyers (customers);
Threat of substitutes; and
Rivalry among existing competitors
34. The most distinctive factor in monopolistic competition: product ditterentiation
35. Total Revenue Calc from Graph: Total revenue is the area of the rectangle P1 × Q1
36. Optimal Price and Output in Monopolistically Competitive Markets: In the short
run, the profit-maximizing choice is the level of output at which MR =
MC and total revenue is the area of the rectangle P1 × Q1
