申論題

Section One: Reading Comprehension (80 points)
 After each reading there are two or three statements. Based on the information in the reading, mark A if a statement is true, B if a statement is false and C if the truth of the statement is uncertain. Each statement is worth four points.
 African agricultural markets are characterized by low farmer revenues and high consumer food prices. Many have worried that this wedge is partially driven by imperfect competition among intermediaries. This paper provides experimental evidence from Kenya on intermediary market structure. Randomized cost shocks and demand subsidies are used to identify a structural model of market competition. Estimates reveal that traders act consistently with joint profit maximization and earn median markups of 39 percent. Exogenously induced firm entry has negligible effects on prices, and low take-up of subsidized entry offers implies large fixed costs. We estimate that traders capture 82 percent of total surplus.

2. Most traders in the market earn markups of less than 50%.