How the U.S. Got Into this Baby Formula Mess

Four U.S. firms, operating a small number of factories to keep production costs low, control approximately 90% of the U.S. infant formula industry. The FDA temporarily closed one firm for safety concerns. Regulatory barriers complicate foreign firms entering the U.S. market.—npr.org

Answer the following questions to check your understanding of the story.

1) In what type of market do U.S. infant formula producers compete? How does this market type arise?

U.S. infant formula producers compete in _____________.

a) a monopoly that arises because all firms are producing the same product

b) an oligopoly that arises because of natural and legal barriers to entry

c) a perfectly competitive market that arises because of natural and legal barriers to entry

d) monopolistically competitive market that arises from firms producing differentiated infant formula

2) How did the United States get into this “baby formula mess”?

The United States got into this “baby formula mess” because ______________.

a) supply chain shortages decreased supply and families were unable to pay the higher equilibrium price

b) one firm closed temporarily, and lost output was not quickly replaced with foreign-produced formula

c) the remaining three U.S. firms no longer produced the quantity at which marginal cost equaled marginal revenue

d) the closing of one firm changed consumer behavior and demand increased

How the U.S. Got Into this Baby Formula Mess

Like this:

Leave a ReplyCancel reply

Share this:

Like this:

Leave a ReplyCancel reply

Discover more from Econ Eye