NOVEMBER 2023 MAIN EXAMINATION

PROGRAMME Postgraduate Diploma in Management

MODULE Economics

INSTRUCTIONS TO CANDIDATES:

• Students are advised to carefully read and understand the questions before answering

them.

• Students must answer the questions fully but concisely and as directly as possible, using

sufficient research and application. All research should be referenced, using the Harvard

referencing protocols.

• Students should follow all specific instructions for individual questions (e.g., “list”, “in

point form”, “show all workings”).

• The mark allocation is an indication of the weight and the length of the question.

• The responses must be your own work. Plagiarism is a form of academic dishonesty and

will not be tolerated.

DATE: 10 November 2023 TIME: 08h30 - 12h30

DURATION: 4 Hours MARKS: 100

Sanaya Meherina
EXAMINER: MODERATOR: Aarifa Razak
QUESTION ONE [55]
Read the article below and answer the questions that follow:
Amazon: US accuses online giant of illegal monopoly
US regulators have sued Amazon, alleging that the internet giant is illegally maintaining monopoly
power.
The Federal Trade Commission (FTC) said Amazon uses "a set of interlocking anticompetitive and
unfair strategies" to push up prices and stifle competition.
Amazon said the lawsuit was "wrong on the facts and law, and we look forward to making that case
in court".
It is the latest technology giant to be sued by US regulators.
The FTC's boss, Lina Khan, has had Amazon in her crosshairs for years.
In 2017, Ms Khan, then only 29, published a major academic article arguing the online retailer had
escaped anti-competition scrutiny.
"With its missionary zeal for consumers, Amazon has marched toward monopoly," she said at the
time.
Since her surprise appointment as FTC Chair in 2021, this case has been widely expected - and
viewed as a crucial test of her leadership.
The dominance of a handful of powerful tech firms has led some US politicians to call for action that
would promote more competition in online search, retail and social media.
However, the FTC under Ms Khan has had little to show for its strong rhetoric against Big Tech.
In February it lost its attempt to stop Meta from buying VR company Within.
And in July it lost an attempt to block Microsoft from completing its deal to buy the maker of Call of
Duty.
There is pressure on Ms Khan to make at least one high profile complaint stick - and at the FTC they
have high hopes for this case.
The agency, along with 17 state attorneys, claims that Amazon is a "monopolist" that stops rivals
and sellers from lowering prices.
The regulator also alleged the internet giant's actions "degrade quality for shoppers, overcharge
sellers, stifle innovation, and prevent rivals from fairly competing against Amazon".
However, Amazon says that if the "misguided" FTC lawsuit is successful, it would mean fewer
products to choose from, higher prices, and slower deliveries for consumers.
The key part of the case involves consumers losing money - getting worse deals - because of the
alleged monopoly.
US anti-competition legislation is complicated, but generally, prosecutors have to show companies
have acted in a way that hurts consumers financially.
That isn't always an easy thing to prove when it comes to Big Tech, as many of their services are
free - like Google's search engine or Meta's Instagram.
Earlier this month, a court battle began between Google and the US government, which has accused
it of having an advertising technology monopoly.
Source: https://www.bbc.com/news/business-66920137

1.1 Taking the characteristics and efficiency of a monopoly into consideration, defend the claim
that Amazon is “maintaining monopoly power” and justify why the government wants to take
legal action against it. (20)
1.2 Amazon offers a subscription service called Amazon Prime, which includes benefits like free
shipping, streaming, and more. This service is also available in South Africa. Comment on
the possible price elasticity of demand for Amazon Prime and explain its importance to
pricing managers of Amazon. (15)
1.3 Amazon also has a platform where physical retail products such as electronics are clothing
are sold. Assume that Amazon has to allocate resources between this platform and Amazon
Prime. Explain how the following diagram can be used by Amazon to make the decision
regarding resource allocation. (20)

QUESTION TWO [45]

Read the article below and answer the questions that follow:
UNEMPLOYMENT CRISIS | GOVERNMENT TO DEVELOP KEY SKILLS IN YOUTH
JOHANNESBURG - The high rate of unemployment in the country reflects the lack of critical skills
within the youth according to the employment and labour department.
South Africa tops the list of countries with the highest unemployment rate in the world.
A whopping 33% of its workforce has no jobs.

1
Employment and Labour Minister, Thulani Nxesi, has been holding meetings with his BRICS
counterparts.
Nxesi says the country will focus more on training the youth to have critical skills.
He said, "we are talking about the skills gap and economists have long said the unemployment in
this country I structural which means it is linked to the skills. Therefore the issue of skills training is
very, very central, we will be exchanging information, we will be exchanging knowledge and
programmes which are going to skill our people especially in certain critical areas, there is a list of
about hundred critical skills which we do not have, which we determined by Minister Nzimande and
Minister of Home Affairs."
"The key issue is about ‘do they have artisanal skills?”, that’s the key issue which you might need
now in the industry."
Source: https://www.enca.com/business/unemployment-crisis-government-develop-key-skills-youth

2.1 Explain the type of unemployment being discussed in the article above and highlight the
effects of this unemployment on individuals, the economy and society as a whole. (20)
2.2 Propose what changes can be made by the government in their policies. (15)
2.3 Given the relationship between unemployment and inflation, discuss the likely impact on
inflation of the above. (10)

END OF QUESTION PAPER