1. Introduction

The power dynamics between food manufacturers and supermarkets often witness supermarkets potentially exploiting their suppliers. However, these manufacturers find themselves locked in this seemingly inequitable cycle owing to the prevalent market structures, namely monopoly and oligopoly, where single or a few entities control the market (Pettinger, 2017). Market failures can occur in such situations due to inefficient resource allocation leading to distortion in market equilibrium (Mankiw, 2015). In the UK, the Competition and Markets Authority (CMA) has been tasked with the responsibility to prevent such failures and foster healthy competition (CMA, 2023). The notorious case of Tesco forcing its suppliers into accepting lower prices in 2015 provides a clear-cut instance of this predicament (CMA, 2015). Thus, understanding these dynamics and regulatory challenges offers a critical lens to analyze the complex supermarket-supplier relationships.

2. First Body Paragraph 250

Requirements:

Define monopoly in detail. Discuss how monopsony relates to monopoly in the context of the supermarket sector. Provide an actual example (using numerical data) of a supermarket acting as a monopoly. You can use cases from the CMA website or other academic resources for this. Include and explain a diagram of a monopoly, highlighting the concept of abnormal (or supernormal) profits and the deadweight loss. Conclude your paragraph with a discussion on the efficiency or inefficiency of this market. Use Harvard OU Referencing for citations. and please include in text citations