The Grapes of Wrath: Competition, Welfare and Efficiency Australia (and the rest of the world) has recently experienced a sharp rise in inflation, often linked to by constraints in primary production and transportation, generating increased input costs which are snowballing through various supply chains. Households have observed this most notably through a sharp increase in the cost of groceries, though retailers have recently come under fire due to claims of price-gouging and other anti-competitive behaviours (see for example, Barrett 2024a; 2024b). This assignment will allow you to consider some of the underlying economic principles which allow us to better understand these phenomena. [Note: The instructions given here are wordy, but intended to give you maximum guidance toward success in this assignment. Type your answers straight into Cadmus. Do not cut&paste, as this will be flagged. Only diagrams should be pasted in, as images.]

a) * Draw two models to represent the operating position of:

i. A price-taking firm in a competitive market in long-run equilibrium. Why might this apply to an Australian fruit grower (e.g., grapes or other fruits as an example of a primary food producer)? 11. A firm with a considerable degree of market power. To what extent does this apply to an Australian food retailer (like Coles or Woolworths)? What is the source of the market power enjoyed by Coles and Woolworths?

b) ** Now suppose we see an increase in input prices. Show what will happen to the price-taking Australian fruit producer described above (e.g., the cost of fertiliser). i. ii. How will this affect the market for fruit, and consumers in this market? How would this cost increase flow through to affect the food retailer described above? Will this firm be affected in a similar way?

c) *** The price of food in supermarkets increased sharply during the post-pandemic period, which retailers explained was a fuelled by higher input prices. However, Coles and Woolworths have recorded large increases in profits during this same period. How can this happen? What does it tell us about the market power enjoyed by these companies, and what are the economic consequences of this? Are there circumstances where significant market power be considered defensible by economic principles, and does this apply to the Australian supermarket industry? Based on this, how do you think the ACCC should respond to the criticism directed toward Coles and Woolworths?

the Grapes of Wrath: Competition, Welfare and Efficiency Australia (and the rest of the world) has recently experienced a sharp rise in inflation, often linked to by constraints in primary production and transportation, generating increased input costs which are snowballing through various supply chains. Households have observed this most notably through a sharp increase in the cost of groceries, though retailers have recently come under fire due to claims of price-gouging and other anti-competitive behaviours (see for example, Barrett 2024a; 2024b). This assignment will allow you to consider some of the underlying economic principles which allow us to better understand these phenomena. The specific question you have to address in this assignment are provided in Cadmus. Type your responses straight into Cadmus, and do all your editing within Cadmus. Text pasted into Cadmus will be flagged, as will any direct similarity between your submitted text and any material available online, as well as material submitted by other student to date (including in past semesters). Relevant readings and references: Barrett, J. (2024a). Australia's major supermarkets have not given some fruit and vegetable growers price rises in 15 years, inquiry told. The Guardian, 7 Mar 2024 (URL: https://www.theguardian.com/australia-news/2024/mar/07/coles-woolworths-vegetable-growers- price-rices-15-years-supermarket-inquiry) Barrett, J. (2024b). Farmers paid too little, shoppers charged too much - it's a win-win for Australia's supermarkets. The Guardian, 16 Mar 2024 (URL: https://www.theguardian.com/business/2024/mar/16/supermarket-price-inquiry-australia-coles- woolworths)