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A common example of a competitive market is farming. Supposedly all farmers are price takers. Yet we see today big business moving into farming and
A common example of a competitive market is farming. Supposedly all farmers are price takers. Yet we see today big business moving into farming and changing the market conditions. Consider two situations: Farmer Jones is in a perfectly competitive market for milk and Big Farm, Inc. has a monopoly on milk in a region. Draw the demand and supply curves in separate graphs for Farmer Jones and Big Farm, Inc. Include the MR, MC, and ATC curves; the selling price for each; and the "profit box" for each. Compare the price facing the customer under each situation. Are they different? Why or why not? Assume Farmer Jones can sell all the milk he can produce to Local Creamery, Inc. for $X per Cwt. What happens to his total revenue if Farmer Jones tries to sell his milk to the creamery at $(X 1)? At $(X-1)? For what reasons might the government want to break up Big Farm, Inc? Why might they want to make it a regulated monopoly? Why might they want to leave them alone but watch them closely
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