AGEC 440 Exam 2 Questions and
Answers Graded A+
Some Theoretical motivations for IO (industrial organizational) theory assumes
that - Correct answer-Introduces "deviations" from micro- economic theory
- limited information
- government actions
- barriers to entry/exit
- transaction costs
- firm maximizing behavior
Some Industry motivations for IO - Correct answer-Increase concern for the
competitive conditions of agricultural market place
- Mergers and Acquisitions
• Life science sector: Monsanto under went numerous acquisitions (buying up
companies leads to less competitors=few huge players in market bc of this there
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,are concerns for anti trust violations since there are only 2 big players which means
buyers could lower prices and suppliers couldnt do anything about it)
- Concentration
• Hog slaughter industries
- Anti-Trust
efficiency reasons for M&A - Correct answer-- increasing scale to optimal level
- synergies or economies of scope
- improvement in management: economies of scale in management
ex for merger: if a small company with high costs, merges with a big company,
efficiency increases.
synergies or economies of scope formula - Correct answer-
TC(Qa,Qb)<TC((Qa+TC(Qb)) which means you can reduce the total cost of
producing both products separate if you produce them together
questions posed by IO: Is it a Monopolistic competition?
- Is it a cartel or oligopoly? - Correct answer-- Is it a Monopolistic competition?
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
,• E.g. Life sciences: Monsanto dominant leader
- Is it a cartel or oligopoly?
• E.g. OPEC, Ag. co-operatives
Questions of market organization/structure challenges perfect competitive
conditions: - Correct answer-• Price taking behavior
- e.g. Monsanto charges licensing fees for seed
• Free entry/exit
- e.g. high fixed investment in meat slaughter facilities
Definition of an Industry - Correct answer-• Porter defines as "an industry as the
group of firms producing products that are CLOSE substitutes for each other"
(1980)
- e.g. Agricultural industry: all firms that produce some type of live product
industry Dissaggregation - Correct answer-• Industry definition can be further diss-
aggregated (means separated based on sectors) based on similarity
- e.g. livestock, grains and crops, fruits and vegetables
• Further diss-aggregation
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
, - e.g. Canadian corn farming: Industry comprising of establishments growing corn
11115
• Analysis of industry performance depends on level of dissaggregation
Industry Success definition - Correct answer-"the success of an industry in
producing benefits for consumers and producers"
- Industry price, profitability, production efficiencies, Ratio of value of sales to cost
of marketing goods
- E.g. Rate of return in U.S Ag. Industry from 1958-1976 is 0.07
Industry demand - Correct answer-- growth in consumer demand due to say
population or income (but a decline in population but disposable income is
increasing bc they are spending less on kids) example-chinas demographic crash is
a serious issue bc population is decreasing so there will be less people to work but
the market is growing because income is increasing. another ex: in spain they get
paid an hour off to have sex because population is decreasing
Industry supply - Correct answer-- technology with economies of scale
Structure is defined by - Correct answer-number of buyers and seller
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
Answers Graded A+
Some Theoretical motivations for IO (industrial organizational) theory assumes
that - Correct answer-Introduces "deviations" from micro- economic theory
- limited information
- government actions
- barriers to entry/exit
- transaction costs
- firm maximizing behavior
Some Industry motivations for IO - Correct answer-Increase concern for the
competitive conditions of agricultural market place
- Mergers and Acquisitions
• Life science sector: Monsanto under went numerous acquisitions (buying up
companies leads to less competitors=few huge players in market bc of this there
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,are concerns for anti trust violations since there are only 2 big players which means
buyers could lower prices and suppliers couldnt do anything about it)
- Concentration
• Hog slaughter industries
- Anti-Trust
efficiency reasons for M&A - Correct answer-- increasing scale to optimal level
- synergies or economies of scope
- improvement in management: economies of scale in management
ex for merger: if a small company with high costs, merges with a big company,
efficiency increases.
synergies or economies of scope formula - Correct answer-
TC(Qa,Qb)<TC((Qa+TC(Qb)) which means you can reduce the total cost of
producing both products separate if you produce them together
questions posed by IO: Is it a Monopolistic competition?
- Is it a cartel or oligopoly? - Correct answer-- Is it a Monopolistic competition?
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
,• E.g. Life sciences: Monsanto dominant leader
- Is it a cartel or oligopoly?
• E.g. OPEC, Ag. co-operatives
Questions of market organization/structure challenges perfect competitive
conditions: - Correct answer-• Price taking behavior
- e.g. Monsanto charges licensing fees for seed
• Free entry/exit
- e.g. high fixed investment in meat slaughter facilities
Definition of an Industry - Correct answer-• Porter defines as "an industry as the
group of firms producing products that are CLOSE substitutes for each other"
(1980)
- e.g. Agricultural industry: all firms that produce some type of live product
industry Dissaggregation - Correct answer-• Industry definition can be further diss-
aggregated (means separated based on sectors) based on similarity
- e.g. livestock, grains and crops, fruits and vegetables
• Further diss-aggregation
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
, - e.g. Canadian corn farming: Industry comprising of establishments growing corn
11115
• Analysis of industry performance depends on level of dissaggregation
Industry Success definition - Correct answer-"the success of an industry in
producing benefits for consumers and producers"
- Industry price, profitability, production efficiencies, Ratio of value of sales to cost
of marketing goods
- E.g. Rate of return in U.S Ag. Industry from 1958-1976 is 0.07
Industry demand - Correct answer-- growth in consumer demand due to say
population or income (but a decline in population but disposable income is
increasing bc they are spending less on kids) example-chinas demographic crash is
a serious issue bc population is decreasing so there will be less people to work but
the market is growing because income is increasing. another ex: in spain they get
paid an hour off to have sex because population is decreasing
Industry supply - Correct answer-- technology with economies of scale
Structure is defined by - Correct answer-number of buyers and seller
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
