1
AGEC 440 Exam 2 Questions with Answers (100%
Correct Answers)
Some Theoretical motivations for IO (industrial organizational) theory
assumes that 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 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 are concerns for anti trust violations since there
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,2
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 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 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?
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- Is it a cartel or oligopoly? Answer: - Is it a Monopolistic competition?
• 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: 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 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
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, 4
industry Dissaggregation 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
- e.g. Canadian corn farming: Industry comprising of establishments
growing corn 11115
• Analysis of industry performance depends on level of
dissaggregation
Industry Success definition 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 Answer: - growth in consumer demand due to say
population or income (but a decline in population but disposable
© 2025 All rights reserved
AGEC 440 Exam 2 Questions with Answers (100%
Correct Answers)
Some Theoretical motivations for IO (industrial organizational) theory
assumes that 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 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 are concerns for anti trust violations since there
© 2025 All rights reserved
,2
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 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 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?
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,3
- Is it a cartel or oligopoly? Answer: - Is it a Monopolistic competition?
• 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: 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 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
© 2025 All rights reserved
, 4
industry Dissaggregation 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
- e.g. Canadian corn farming: Industry comprising of establishments
growing corn 11115
• Analysis of industry performance depends on level of
dissaggregation
Industry Success definition 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 Answer: - growth in consumer demand due to say
population or income (but a decline in population but disposable
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