Changes in car production Car production is changing. Until recently car manufacturing firms had the most power in the market. Now, however, firms producing car parts are gaining more power. The markets for both cars and car parts consist of a relatively high number of firms that range from very large to small. In 2014 the market was dominated by sixteen major car firms, each selling more than one million cars a year. In that year there were ten major car part firms and these were gaining more power over the car producers. The world's largest car part supplier by revenue claims to supply at least one of the parts in every car sold throughout the world. The firm has grown as a result of mergers and is moving towards total control of the market. It is seeking to build up high barriers to entry and to become the sole producer. The ten largest car part firms accounted for 63% of the total output of car parts in 2013, producing US$250 billion of car parts in that year. These ten firms now have the ability to build 85% of a car's internal systems, leaving the car manufacturing firms to make little more than the engine. Car production is increasing in a number of developing countries but declining in some developed countries. Car manufacturing increased in the UK between 2013 and 2014, but the industry had been experiencing problems before 2013. In 2008 the average wage of car workers fell. In that year the UK experienced a recession. Real wages in the UK car industry for the lowest paid workers also declined after 2008 and the number of workers employed fell between 2008 and 2012. This was despite output per worker increasing, partly because some less skilled workers lost their jobs and the industry replaced some of these workers with capital equipment. Buyers of cars often borrow money from commercial banks to make their purchases. In some cases buyers use their savings, which may be withdrawn from commercial banks, to buy cars. The behaviour and performance of car firms are influenced by the economic system of the country they are producing in. In countries with a market system there is likely to be greater consumer sovereignty. Car firms in such countries may be more likely to innovate, bringing in new methods of production and developing higher-quality products.

1. (a)Using information from the extract, identify two characteristics of monopoly.[2]
2. (b)Calculate the total output of car parts in US$ in 2013.[3]
3. (c)Explain, using information from the extract, why wages in the UK car industry fell in 2008.[2]
4. (d)Using information from the extract, explain two merits of a market system.[4]
5. (e)Analyse two reasons, referred to in the extract, why a decrease in employment may increase labour productivity.[4]
6. (f)Discuss whether a declining car industry should be protected by the government.[5]
7. (g)Using information from the extract, explain two functions of commercial banks.[4]
8. (h)Discuss whether small car manufacturing firms can compete with large car manufacturing firms.[6]