Assignments must be submitted using the 'Assignment Tool' via the LMS subject site for Introductory Microeconomics (For further instructions see the notes on 'Submitting Assignments 1 and 2' in the Subject Guide.) Make sure that you have a cover page that includes your name, Student ID, tutor's name and tutorial time. Please remember to keep a copy of your assignment. This assessment exercise will account for 15 per cent of your final grade in the subject. The assignment will be marked out of 30. Word limit: 1500 words (Word limit does not include tables, diagrams and references) The assignment has two parts – Part A (1000 words) and Part B (500 words) Part A (20 marks) (1000 words) Questions Question 1 (5 marks) Refer to Attachment 1 'Q&A's bush bash: Farmers demand halt to coal-seam gas mining to safeguard food and water security' and answer the following questions: a) What is the negative externality effect associated with coal-seam gas mining? (1 mark) b) What does the existence of this negative externality effect imply about the actual level of coal-seam gas mining compared to the socially efficient level? Using a supply and demand diagram explain and illustrate your answer. (2 marks) c) Suggest two policies that could be adopted to achieve the socially efficient level of coal-seam gas mining? (2 marks) Question 2 (5 marks) Refer to Attachment 2 'The Monsanto Monopoly' and 'The Growing Global Challenge to Monsanto's Monopolistic Greed' and answer the following questions: (a) Monsanto has considerable market power in the US seed market. What barriers to entry might be important in establishing and maintaining Monsanto's market power? (1 mark) (b) What if the US Department of Justice's investigation into Monsanto's patents and practices in the industry had found against Monsanto. Suppose it cancelled Monsanto's patents on GM seeds and decided that Monsanto's practices were 2 anticompetitive in the seed industry. What would be the likely effects of this action on the seed market in the US? (2 marks) (c) There has been considerable public debate about the costs and benefits of patents. If the government was to introduce legislation to provide for lower levels of protection of intellectual property in the seed industry, how might this affect Monsanto's incentives to develop new products? Discuss the implications of such legislation for economic efficiency. (2 marks) Question 3 (6 marks) Refer to Attachment 3 'Why 2014 Will Finally Be the Year of the Online Grocer' and answer the following questions: (a) How are the fixed costs and marginal costs likely to differ between the traditional grocery store and the online supply of groceries? Explain and illustrate your answer. (2 marks) (b) Assume that the grocery market is perfectly competitive. There are a large number of identical firms, each of which has a U-shaped marginal cost and average total cost curve. Suppose that the grocery market is initially in long-run equilibrium with all firms using the traditional method of supplying groceries (i.e., supermarket stores). Then the online supply of groceries is introduced that existing firms are able to adopt in the short-run, and other potential suppliers are able to adopt in the long-run. (i) What is the likely short-run effect of the introduction of the introduction of the online method of supplying groceries on a firm's cost, quantity supplied and profits? What is the effect on market equilibrium price and equilibrium quantity traded? Explain and illustrate your answer. (2 marks) (ii) What is the likely long-run effect of the introduction of the introduction of the online method of supplying groceries on a firm's cost, quantity supplied and profits? What is the effect on the number of firms, and market equilibrium price and equilibrium quantity traded? Explain and illustrate your answer. How does this equilibrium differ from the initial equilibrium? (2 marks) Question 4 (4 marks) Refer to Attachment 4 'Robots May Revolutionize China's Electronics Manufacturing Machines in Pipeline to Supplant Workers as Pay Soars and People Age' and 'This Robot Could Transform Manufacturing' and answer the following questions: a) What do you estimate is the likely impact of the introduction of robotic manufacturing in electronic firms on the fixed costs and marginal costs of production? (2 marks) b) Explain and illustrate how you think the average total cost of each production method will vary with the quantity of output. How should a profit-maximisising firm make the choice between the alternative methods of production? (2 marks)