Oligopoly

(a) Explain one reason why consumers buy less than the social optimum quantity of healthy food.

(b) With reference to Extract B, examine two likely reasons why wages in supermarkets are above the National Minimum Wage of £10.42.

(c) With reference to Figure 1 and Extract C, discuss whether supermarkets charging similar prices for petrol is evidence of collusion. Use game theory to support your answer.

EITHER

(d) Evaluate the microeconomic and macroeconomic effects of high levels of inflation. Refer to the UK or any other developed economy in your answer.

Explain one reason why consumers buy less than the social optimum quantity of healthy food.

With reference to Extract B, examine two likely reasons why wages in supermarkets are above the National Minimum Wage of £10.42.

With reference to Figure 1 and Extract C, discuss whether supermarkets charging similar prices for petrol is evidence of collusion. Use game theory to support your answer.

EITHER

Evaluate the microeconomic and macroeconomic effects of high levels of inflation. Refer to the UK or any other developed economy in your answer.

Evaluate the microeconomic and macroeconomic effects of a regional trade agreement between the UK and the EU.

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With reference to the information on the preceding page, explain the market structure of mortgage lending in the UK.

The value of all mortgage loans was £1 601 billion at the end of 2020.

Which one of the following is the value of Lloyds’ market share?

With reference to Figure 1, explain the market structure that best describes the market for UK online streaming services.

With reference to the information provided, assess whether Netflix subscribers behave rationally.

With reference to the information provided, examine the likely numerical value of the cross elasticity of demand between UK online streaming services.

With reference to Extract C, discuss the likely private and external benefits of viewing educational websites and TV programmes.

Using examples from Figure 2 or Extract B, discuss the likely impact of price discrimination on a firm’s profits. Use a relevant diagram to support your answer.

Using the data provided in Extract D, explain one role of financial markets.

Examine two reasons why retailers on the high street tend to remain small.

Discuss possible methods of price and non‑price competition that firms could use to increase the value of sales on the high street.

EITHER

Evaluate the microeconomic and macroeconomic effects of falling house prices.

Evaluate the microeconomic and macroeconomic effects of labour shortages in the UK, or a developed economy of your choice.

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Pilgrim’s Pride is the second-largest chicken supplier in the US. It will pay a $107.9 million fine for price fixing with Tyson Foods and other chicken suppliers. The firms limited production to force prices higher and harm major customers, including KFC. Pilgrim’s Pride is thought to have gained at least $361 million in total revenue from the collusion.

(Source: adapted from https://www.drovers.com/news/industry/ pilgrims-pride-agrees-price-fixing-fine)

Draw a simple two firm/two outcome game theory model to show why the chicken suppliers may have colluded.

Which one of the following is most closely associated with tacit collusion?

With reference to Figure 1, calculate the three-firm concentration ratio for branded coffee shop chains.

With reference to Figure 2 and your understanding of price elasticity, examine two factors that may cause significant changes in the international price of coffee beans.

Profit maximisation is assumed to be the business objective of most firms. With reference to Extract A, assess whether this is the case for coffee shop owners.

Using a cost and revenue diagram, discuss the likely impact of ‘rising costs’ for coffee shops on their profitability (Extract A, line 2).

With reference to the information provided, discuss whether the coffee shop market is contestable.

In many industries, such as banking, health insurance, internet search engines, pharmaceuticals, social media and telecommunications, there have been increases in market concentration.

Evaluate the possible consequences for business decision making of increased market concentration. Refer to industries of your choice in your answer.

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In October 2017 Scania, the Volkswagen-owned truck maker, was fined €880 million (£771 million) by the European Commission for colluding with five other truck manufacturers over a 14-year period. The firms had agreed to coordinate prices after experiencing additional costs of meeting emission regulations.

With reference to an industry of your choice, evaluate why some firms engage in collusive behaviour.

With reference to Figure 1 and Extract A, explain what is meant by a ‘highly concentrated’ market for potato crisps (Extract A, lines 2–3).

Apart from changes in indirect taxes and subsidies, examine two causes of income inequality within a developed economy such as the UK.

In Extract A, lines 15–16, it was suggested that some firms may respond to the advertising ban by cutting the prices of their products.

Using game theory and the information provided in Figure 1 and Extract A, discuss the effects on firms of cutting prices in an oligopolistic market.

EITHER

Evaluate the microeconomic and macroeconomic effects of increased government spending on education to promote healthy eating in the UK.

Evaluate the likely microeconomic and macroeconomic effects of imposing a tax on HFSS foods .

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The following graph shows the global sales of personal computers (PCs) between 2011 and 2015.

(Source: adapted from IDC and reported in The Times, 14th January 2016)

The percentage decrease in sales of PCs between 2011 and 2015 is:

Explain one likely reason for the decrease in sales of PCs.

The following table shows global sales of PCs by company in 2015.

(Source: IDC, reported in The Times, 14th January 2016)

Calculate the five-firm concentration ratio. You are advised to show your working.

With reference to Figure 1, briefly explain the market structure that best describes the UK branded coffee shop market.

With reference to Figure 3 and other information provided, discuss the price and non-price strategies that Starbucks may use to increase profitability.

Examine the advantages of using an indirect tax as a means of reducing the use of disposable coffee cups.

EITHER

Evaluate the microeconomic and macroeconomic factors that may influence Starbucks’ decision whether to expand in a particular country.

With reference to the information provided and your own knowledge, evaluate the microeconomic and macroeconomic effects of increased UK demand for coffee at branded coffee shops.

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With reference to Figure 1 and Extract A, explain one likely reason for the change in the four-firm concentration ratio of the supermarket sector between 2010 and 2015.

With reference to Figure 2 and Extract A, discuss the possible impact of supermarket monopsony power on both food suppliers and consumers.

Examine measures the government might use to restrict the monopsony power of supermarkets.

Assess the extent to which ‘information gaps’ (Extract B, lines 5 and 6) and ‘irrational behaviour’ (Extract B, line 11) are the main causes of food waste in the UK.

Discuss the likely problems for Sainsbury’s and Morrisons if the suggested merger between them goes ahead. Refer to Figure 1, Extract C and your own knowledge in your answer.