1. Assume that the US has monopoly power as a country in the international market for corn. In a diagram, show the residual demand for US corn. Show the supply curve for US corn farmers, assuming they are price takers as individual farmers.

Clearly show the optimal (joint profit maximizing) price and quantity to set for this corn if you were the American Corn board (ACB), an exporting monopoly.

Then show the price and quantity that occurs if the monopoly is ended and if the American corn farmers now sell their corn individually (ignore transaction costs)

2. Beside your first diagram, show a typical individual US corn farmer's demand and costs (assume the farmer is a price-taker). Show the output the farmer chooses when the monopoly is eliminated. (For simplicity, also assume that this is a point of long run equilibrium.)

Show the output that the farmer would have wanted to produce and sell when the monopoly price was in place. What would happen to the price obtained by US farmers, if every farmer actually tried to sell this amount?

3. Given your answers to (a) and (b), explain what actions the ACB would need to have taken in order to get the farmers higher prices than they could have obtained as individuals. Explain why you think individual farmers, nevertheless, might have been unhappy at the actions of the Board and felt that they could do better on their own.

4. US Trade Minister Jeff Button is quoted as saying: "If you enter a race and you're the only entrant, you're probably not going to run very fast. But if you've got a red-hot field, it's going to bring out the best in you."

In economic terms, what is he asserting about the advantages of competition over monopoly?