Beef Processing in the U.S.

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

Why would a firm struggle to enter the U.S. meat processing market?

Because __________ creates a barrier to entry.

a) a high minimum efficient scale

b) a low minimum efficient scale

c) high cattle prices

d) high processed meat prices

What type of market is the U.S. meat processing industry?

a) Monopolistic Competition

b) A natural oligopoly

c) A natural monopoly

d) Perfect Competition

Were the Big Four firms accused of cartel-like behavior?

a) No, because four firms are not enough firms to form a cartel.

b) Yes, because they were accused of coordinating to restrict supply and raise prices.

c) No, because conspiring together to restrict supply always happens when the supply of an input decreases.

d) Yes, because all oligopolies act like a cartel.

Suppose that Tyson and JBS make an agreement to decrease production. Table 1 shows the profits from complying or cheating on the agreement. What is the Nash equilibrium when the game is played once?

The Nash equilibrium is that Tyson _________, and JBS _________.

a) complies; cheats

b) cheats; cheats

c) complies; complies

d) cheats; complies

Why would Tyson and JBS not play the Nash equilibrium?

a) Because they play the game repeatedly.

b) Because four firms are involved.

c) Became they play the game only once.

d) Because the game is a prisoners’ dilemma

Beef Processing in the U.S.

Table 1 Hypothetical Payoffs of the Top Two Meat Processing Firms in the U.S.

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Table 1 Hypothetical Payoffs of the Top Two Meat Processing Firms in the U.S.

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