Answer the questions at the end of the
100 points

answer:

1.using   economic   concepts   explain   the   growth   in   multiple   food   stores   from 1850s to present.

economies of scale → firm competitive advantage→ consolidated through marketing/advertising→   favourable   externalfactors     such     as     growing consumer   wealth;   enabling   change   in   labour   markets   (e.g.   increased flexibility, need for greater more convenience, etc. → growing barriers to entry as financial advantage secures wider access to land banks for example.

2.identify the limitations of using the concentration ratio as a measure of market power and evaluate the extent to which these can be overcome by using the herfindahl-hirschman index.

the   market   concentration   ratio   provides   an   indication   of   the   percentage market share of the largest x firms →the limitations of the concentration ratio (chiefly   no   indication   of   relative   market   shares)   led   to   a   more   discerning measure, the herfindahl-hirschman index (hhi)→hhi is given by the sum of the squares of the market shares of each firm in the industry and provides a better indication of industry features to include the extent of equality of market shares → problems remain students should identify change in supermarket profile as safeway exits and morrison (and walmart enter) .

price variation may be due to monopoly power and price control →students should also consider exchange rate effects→ high sterling value at the time of   the investigation →   relatively higher uk building costs → tax differences (this latter   element   was   taken   into   account   at   the   time   of   comparison,   as   were quality   differences,   but   students   may   raise   these   as   this   information   was   not includedin the case).

4.identify   and   explain   the   technical   economic   concepts   associated   with   the pricing   regimes   indicated   in   paragraph   9.   what   are   the   associated   welfare consequences?

predatory   pricing,   prices   set   below   average   cost   →the   difficulty   lies   in identifying   the   relevant   firm   cost   base→students   may   identify   differences between   short   run   costs   and   long   run   costs,   different   costs   dependent   on volume produced, etc→ having identified this difficulty students should then consider   the   welfare   consequences   that   result   from   pricing   below   cost→ range of responses should include concerns that this strategy could drive out competition and secure higher long term pricing of dominant firm→ impact on consumer/producer surplus→discriminatory pricing, price variation that   does not reflect product difference and/or additional costs→ identification of the  

2three degrees, first/second/third degree→ consideration of possible welfare effects to include potential benefits of cross-subsidy that enable the servicing of a market that might not otherwise be considered.

5.discuss the regulatory implications associated with the remedies identified but dismissed as unsuitable in paragraph 10.

government     regulation     carries     a     commensurate     direct     cost     through administration,   monitoring   and enforcement, etc → there are also indirect costs through its relative veracity in carrying out enforcement → direct costs may   be   increased   disproportionately   through   excessive   regulation   relative   to the gains made in seeking compliance → over-regulation may   impose   the indirect cost of a disincentive effect to business activity.

6.in what sense do land-banks represent a barrier to entry?

ownership   and   control   of   land   banks   provides   supermarkets   with   the   means of   building   more   supermarkets   and/or   preventing   other   supermarkets   from building →the capacity to pursue this course of action is dependent on access to   significant   financial   resources → the greater the market share the greater the   likelihood   of     being   able   to   access   requisite   funding   and   thereby   erect   a barrier to other supermarkets being able to accumulate land → the relative absence of planning permission is therefore less of an issue if the intention is to prevent and/or deny other supermarkets the possibility of being able to gain market share. 7.the   final   paragraph   embodies   the   sentiments   of   which   key   economist(s). explain and justify your choice.

adam   smith   associated   with   the notion   of   firm   self-interest   and   the   potential for societal gain → schumpeter introduces the scope for falling average costs through creative destruction → hayek the role of price signals → by contrast we have the concerns of welfare economist such as sen which focus on the uneven   gain/loss.   students   should   extend   the   discussion   to   explore   the welfare   consequences   of   economic   activity   as   illustrated   by   the   supermarket industry   and   articulated   by   such   groups   as   friends   of   the   earth (environmental concerns ofstock-piling land banks, etc)

explanation: