AGB 144 monopoly
Oligopolistic industries are characterized by
Few dominant firms and substantial entry barriers
The term oligopoly indicates:
Few firms producing either a differentiated or homogeneous product
Other things equal, economists would prefer
Free trade to tariffs and tariffs to import quotas
The study of how people (or firms) behave in strategic situations is called
Game theory
The demand for agricultural products
Has a price elasticity coefficient of about .20 to .25
Economic profit in the long run is:
Possible for a pure monopoly, but not for a pure competitor."
Biggest threat to production agriculture
Price and income instability
"Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's: "
Price would be higher, but output would be lower."
Productive Efficiency
Produce goods at least cost
Comparative advantage
Produce the product for lowest opportunity cost
If the demand for an agricultural product is inelastic, a bumper crop will
lower price and decrease total revenues.
Absolute Advantage
most efficient producer of product
In which of these continuums of degrees of competition (highest to lowest) is oligopoly properly placed?
pure competition, monopolistic competition, oligopoly, pure monopoly
Acreage allotment programs were designed to:
reduce the supply of agricultural products.
What percentage of their spending do U.S. consumers allocate to food purchases
13%
US % of export for the world
8.5%
Which of the following is correct?
A purely competitive firm is a ""price taker,"" while a monopolist is a ""price maker."
Pure monopoly refers to:
A single firm producing a product for which there are no close substitutes.
EU
Abolished tariffs and quotas to member nations
Nonprice competition refers to
Advertising and promotion
Which of the following arguments is not generally made to justify farm subsidies
Agribusiness firms need subsidies to achieve economies of scale.
OPEC provides an example of
An international cartel
The MR = MC rule:
Applies both to pure monopoly and pure competition.
"If a regulatory commission wants to establish a socially optimal price for a natural monopoly, it should select a price: "
At which the marginal cost curve intersects the demand curve.
Which of the following is the best example of oligopoly
Automobile manufacturing
"If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to: "
Average total cost.
Monopolistic competition resembles pure competition because
Barriers to entry are either weak or nonexistant
The food-stamp program is designed to:
C. increase the demand for farm products.
Most important trade partner
Canada
US Exports
Chemicals, Ag products, aircraft
More important to have absolute advantage or comparative advantage
Comparative
Countries engaged in international trade specialize in production based on
Comparative advantage
The kinked-demand curve of an oligopolist is based on the assumption that
Competitors will follow a price cut but ignore a price increase
Differences in production efficiencies among nations in producing a particular good result from
Different endowments of fertile soil, different amounts of skilled labor, different levels of technological knowledge.
Which of the following arguments for trade protection is based on the premise that a nation should have a wide enough range of domestic industries to be self-sufficient if necessary
Diversification-for-stability argument
Which statement is correct
In the long run purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits.
Because government price supports cause surplus production, government policies have been designed to:
Increase demand and decrease supply of farm products.
Cartels are difficult to maintain in the long run because
Individual members may find it profitable to cheat on agreements
The demand for most agricultural products is
Inelastic with respect to price, elastic with income
Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive
Infant industry argument
In the theory of comparative advantage, a good should be produced in that nation where
Its cost is least in terms of alternative goods that might otherwise be produced
Monopolistic competition is characterized by a
Large number of firms and low entry barriers
US
Leads world in combined volume of exports and imports as measured in dollars
Import quota
Limit on the amount or value of a product
An unregulated pure monopolist will maximize profits by producing that output at which:
MR = MC.
When a monopolistically competitive firm is in long-run equilibrium:
MR > MC and P = minimum ATC
Tariffs
May be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs).
Monopolistically competitive firms
May realize either profits or losses in the short run, but only accounting profits in the long run
The restaurant, legal assistance, and clothing industries are each illustrations of
Monopolistic Competiton
Under monopolistic competition entry to the industry is
More difficult than under pure competition but not nearly as difficult as under pure monopoly.
The primary gain from international trade is
More goods than would be attainable through domestic production alone
What is a unique feature of oligopoly?
Mutual interdependence
"At its profit-maximizing output, a pure nondiscriminating monopolist achieves: "
Neither productive efficiency nor allocative efficiency.
NAFTA
North american free trade agreement
Pure monopolists may obtain economic profits in the long run because:
Of barriers to entry.
US Imports
Oil, cars, metals, appliances
The demand for agricultural products is:
Relatively inelastic with respect to price
Allocative Efficiency
Right mix of goods produced
Which of the following best approximates a pure monopoly?
The only bank in a small town
A dilemma of regulation is that:
The regulated price that achieves allocative efficiency is also likely to result in losses.
Price discrimination refers to:
The selling of a given product at different prices that do not reflect cost differences.
Which of the following best describes the short-run problem faced by farms
The supply of farm products has increased relative to the demand for them, and because demand is inelastic, prices of farm output and farm income have therefore declined.
"What do economies of scale, the ownership of essential raw materials, and patents have in common? "
They are all barriers to entry.
GATT
Tried to lower barriers to trade
The World Trade Organization
Was established to resolve disputes arising under world trade rules
The monopolistically competitive seller maximizes profit by producing at the point where:
Where marginal revenue equals marginal cost
Which of the following is not a barrier to entry?
X-inefficiency
An extraordinarily small crop of farm products due to drought causes
a large increase in the price of farm products because the demand for farm products is price inelastic.
Farm share of U.S. GDP has
declined from about 7 percent in 1950 to 1 percent today
Collusive Pricing
firms meet to agree to price and quantity to ensure max profits
WTO
successor to gatt
In the United States cartels are
violation of anti trust laws