Tag: economies of scale

The surprise winner of the Nobel prize for economics this year was Paul Krugman: academic, writer and columnist for the New York Times. He is an economist with a gift for explaining economic principles and concepts in clear and simple terms. However, the award was given, not for his writing skills, but for his work on international trade theory and economic geography.

In praise of ….Paul Krugman Guardian (14/10/08)
Hotdog economics Guardian (13/10/08)
Nobel economics prize: And the winner is ….. Guardian (13/10/08)
Academic and columnist Paul Krugman wins Nobel Prize for Economics Times Online (13/10/08)
Bold strokes The Economist (16/10/08)

Questions

1. Write a brief paragraph summarising Krugman’s work on trade patterns.
2. Define the term ‘economies of scale’. Explain why this concept was important to Krugman’s work on trade patterns.
3. Assess the extent to which Krugman’s work has helped to explain the impact of free trade and globalisation.

Reading the first article linked to below, you may be forgiven for thinking that farming has moved into the realms of science fiction. Dairy farming has moved determinedly into the era of technology and now benefits from extensive economies of scale with much higher productivity levels than even a decade ago. Yet 3000 dairy farmers are planning to leave the industry in the next two years and even the largest farms are struggling to make money. The processing sector has become significantly more concentrated and margins are being squeezed ever further by the power of the supermarkets, so has the market become unbalanced with too much power in the hands of supermarkets and processors?

Rising prices, failing farms. The strange story of milk Guardian (24/4/07)
Why British dairy farming is in crisis Guardian (24/5/07)

Questions

1. Describe the market structure of the milk industry.
2. Discuss the extent to which this market structure has changed the level of prices in the market for milk in recent years.
3. Evaluate possible measures that governments could implement to make the market for milk more competitive.