Exam Three Study Guide. AGEC 505. Agricultural Market Structures. Spring 2008. EXAM COVERS : Chapter 10, Sections 10.3-10.7, Chapter 11 I. REVIEW: COMPETITION AND MONOPOLY A. Competition 1. Supply = cost of production = MC = C’(Q) 2. Demand = willingness to pay = AR = P(Q) B. Profit-maximization solution 1. MR = MC δ TR/ δ Q = C’(Q) C. Lerner Index D. Sources of Monopoly Power ***Elasticity of demand (Ed)*** 1. Barriers to Entry a. Natural Monopoly E. Welfare Effects II. MONOPSONY A. Terminology: MV, AE, ME B. Why is ME>AE? Intuition and derivation C. Sources of Monopsony Power
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