Question

2. Suppose that a firm can decrease the rate at which its variable cost increases by paying a larger fixed cost up front. Plot the two fixed cost curves in one diagram. Plot the two average fixed cost curves in a second diagram. Plot the two variable cost curves in a third diagram. Plot the two average cost curves in a final diagram. Explain why this kind of technological change may explain why large chain stores like WalMart and Costco have driven many small mom and pop stores out of business.

Answer 1

Here is the plots for all the cost types:-

These are the reasons for poping out small bussinesses by large chain companies :-
• Walmart and other large chain companies has been known to have on the communities in which it builds locations.

•The presence of these store can hurt the lower wages for local workers.

•There immense buying power and capital.
•They can also affect suppliers, who must drive their production costs down in order to afford to sell to Walmart or other.

•Smaller companies or businesses cannot afford a higher wages for there workers as compared to these big ones.

•Having brand values may also affect these small businesses.