Answer to Question #52923 in Microeconomics for Yana

Question

Since the 1980s, Wal - Mart stores have appeared in almost every community in America. Wal
- Mart buys their goods in large quantities and therefore at cheaper prices. Wal - Mart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at Wal - Mart because of low prices and free parking. Local retailers, like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that:
a. consumers are boycotting local retailers.
b. Wal - Mart engages in illegal acts of monopolization.
c. there are diseconomies of scale in retail sales.
d. there are economies of scale in retail sales.
e. Wal - Mart is managed by ruthless business people.

Answer 1

Since the 1980s, Wal - Mart stores have¬ appeared in almost every community in America. Wal - Mart buys their goods in large quantities and therefore at cheaper prices. Wal - Mart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at Wal - Mart because of low prices and free parking. Local retailers, like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that:
d. there are economies of scale in retail sales.
Because the large is the firm, the lower are average costs.