The automobile industry in the United States has existed since the early 1900s. In the first
few years of the century automobiles were an extreme luxury item for most of
Americans. It was not until Henry Ford and his invention Model T in 1908 that the
Midterm Exam (80 points)
ECON 305: Industrial Organization
Fall 2015, October 13
Readings we have covered so far this semester:
Pepall et al., Chapters 1-7. The exam will cover up to Chapter 6.
McMillan, preface and chapters 1, 2, 5, 10, 8, 1
In Chapter 7 in Pepall et al.
Briefly explain horizontal product differentiation and vertical product
Horizontal product differentiation is when a firm offers a variety of products in
response to different consumer tastes.
5.5 5.6 6.1
In Pepall et al.
Explain in words the necessary condition for third-degree price
discrimination to increase welfare.
1 A necessary condition for third-degree price discrimination to increase
welfare is that it increases total output.
In Pepall et al.
What are economies of scope? What are the two reasons such economies arise?
Give an example.
An economy of scope arises when average costs go down when a firm
produces more products. Particular outputs share common inputs. Cost
The founding of DeBeers Mining Company
o In the 1860s diamonds were discovered in the rivers of South Africa and people began
panning for them. They realized they need to dig to find more and eventually the mines
became flooded. Cecil Rhodes beg
What is one of the keys to a well-designed market?
1 Well designed markets have a variety of mechanisms,
formal and informal, to ensure there is indeed money in
being honest. Marketplace confidence rests on rules and
customs that give even unscrupulous p
The distribution and items contained in the Red Cross food
tinnedmilk, jam, butter,biscuits,bully,chocolate,sugar,etc., and
cigarettes. So far the supplies to each person were equal and
regular. Private parcels of clothing, toiletre qu