1) What is the difference between a 'pure monopsony' and a 'pure monopoly'? (2 Marks)
A pure monopsony is a single buyer in a market place whilst a pure monopoly is a single seller in a market place.
2) A computer manufacturer has significant monopsony power over its component suppliers. Explain the effect on the manufacturer's monopoly power of:
A) Component suppliers integrating horizontally (3 Marks)
sdf
B) Lower market concentration among component suppliers (3 Marks)
3) Read the following
Extract A
Mega-dairies aim to challenge supermarkets
Complaints from dairy farmers against powerful supermarkets are nothing. In 2007 - 2008 it as reported that farmers on average made a loss of 1p on every pint sold and now many farmers are paid below the cost of production. Supermarkets can use their considerable buying power to keep the cost of milk low, in order to keep prices competitive for consumers. Morrisons has responded to critics by offering a new milk brand that will mean farmers are paid 10p more per litre.
However, some dairy farmers have decided to increase their scale in order to survive and therefore created mega-dairies. Nocton in Lincolnshire is the site of the UK's first mega-dairy, a concept that has been operating in the USA for many years. A mega-dairy is typically 30 times bigger than a normal dairy farm, with cows housed indoors in massive warehouses. The hope is that mega-dairies will allow dairy farmers to survive as they can achieve lower costs through economies of scale, as well as giving them more power at the bargaining table when negotiating with the supermarkets
3) Define the term 'monopsony power'. (2 Marks)
4) Analyse two benefits to customers of supermarkets' monopsony power. (6 Marks)
5) Examine the likely negative impacts on UK dairy farmers of supermarkets monopsony power (2 Marks)
A pure monopsony is a single buyer in a market place whilst a pure monopoly is a single seller in a market place.
2) A computer manufacturer has significant monopsony power over its component suppliers. Explain the effect on the manufacturer's monopoly power of:
A) Component suppliers integrating horizontally (3 Marks)
sdf
B) Lower market concentration among component suppliers (3 Marks)
3) Read the following
Extract A
Mega-dairies aim to challenge supermarkets
Complaints from dairy farmers against powerful supermarkets are nothing. In 2007 - 2008 it as reported that farmers on average made a loss of 1p on every pint sold and now many farmers are paid below the cost of production. Supermarkets can use their considerable buying power to keep the cost of milk low, in order to keep prices competitive for consumers. Morrisons has responded to critics by offering a new milk brand that will mean farmers are paid 10p more per litre.
However, some dairy farmers have decided to increase their scale in order to survive and therefore created mega-dairies. Nocton in Lincolnshire is the site of the UK's first mega-dairy, a concept that has been operating in the USA for many years. A mega-dairy is typically 30 times bigger than a normal dairy farm, with cows housed indoors in massive warehouses. The hope is that mega-dairies will allow dairy farmers to survive as they can achieve lower costs through economies of scale, as well as giving them more power at the bargaining table when negotiating with the supermarkets
3) Define the term 'monopsony power'. (2 Marks)
4) Analyse two benefits to customers of supermarkets' monopsony power. (6 Marks)
5) Examine the likely negative impacts on UK dairy farmers of supermarkets monopsony power (2 Marks)
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