Log in
Economics
1
answer
0
watching
90
views

(3 points) Is Walmart Good for America? Read John Miller, "What's Good for Wal-Mart"€ (article 4.4 in Real World Micro). Are lower prices at Walmart necessarily good? Would it be a good or bad thing if Walmart raised wages and raised prices? What would you need to know to answer these questions? What do you think? Explain and support your opinion.

Watch
1
answer
0
watching
90
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Joshua Stredder
Joshua StredderLv10
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

Case Study #3

TO WAL-MART OR NOT TO WAL-MART?

Wal-Mart is a $250-billion-a-year retailer. Eighty two percent of U.S. households made a

Wal-Mart purchase in 2002. It is the largest company in the world with a global

workforce of 1.4 million. Where Wal-Mart competes the average grocery prices are 14%

lower. In the past it was General Motors, IBM and other companies that were considered

to be the leaders in industry and the ones to watch. Now it is Wal-Mart that is being

studied in universities around the world.

At Wal-Mart, cost is king. Costs are kept low and this translates into goods being sold

for less. The entire organization is focused on reducing costs and passing those savings

on to the consumer. This allows poor people to buy food and other necessities that they

otherwise might not be able to afford. In the U.S. it dominates sales in a number of

categories : 32% of disposable diapers, 30% of hair products, 26% of toothpaste, 20% of

pet food and 13% of textiles.

Wal-Mart simply has developed the most efficient methods for operating their business.

Their inventory management, through a network of scanners, computers, and at-the-ready

suppliers, makes it the leader in successful turnover of inventory. How can we blame

Wal-Mart for being the efficient cost conscious giant that it is?

The Wal-Mart phenomenon has occurred at the same time that high-paying skilled jobs

are being lost in the manufacturing sector. When these jobs are lost, the alternative often

means being employed at Wal-Mart at a much lower pay scale with reduced benefits

such as medical insurance. Its labor costs are twenty percent less than those at

unionized supermarkets, and sales clerks make less, on average, than the federal poverty

level ($8.50 an hour).

Barbara Ehrenreich* has described the problems faced by the under class, such

as waitresses and Wal-Mart employees. They barely survive on a day-to-day basis, living

from hand to mouth, with no reserves, no safety net, no medical insurance and almost no

prospect of improving their positions in life.

The loss of manufacturing jobs has affected the lifestyles of many people. What they see

is the reality of reduced opportunity with a permanent reduction in wages and standards

of living. They are trapped in a new marketplace, with diminishing expectations and few

alternatives to shopping at Wal-Mart. This is a change in our American culture--the

dreams have now been down-sized.

Is Wal-Mart the hero or the culprit? After all, low prices, competition, and growth have

all been mantras that Americans have been chanting all of our lives. We were

told that if you built a better mouse trap, everyone would come to you. Well, Wal-Mart

has built a better mouse trap. Is there any logic in our looking at Wal-Mart as a

contributor to the loss of some our middle class or is it just jealousy and sour grapes?

For one thing, its hard line on costs has forced many factories to move overseas.

Wal-Mart imported most of the items it sells. Environmental standards

are lower in these countries where these goods are manufactured than they are in the

U.S. This probably results in increased health issues and costs. In addition, shipment of

goods many thousands of miles to their ultimate destinations, involve utilizing the

world’s limited oil resources. When you add up all this, the cost of the goods may be

greater than if they were produced in this country.

Another issue is that Wal-Mart is a non-union employer paying wages that are below the

poverty level, with minimal health insurance coverage. As many employees cannot

afford the co-payment required for doctors office visits, when a medical crisis occurs they

are forced to use the emergency room facilities of local hospitals. The result is that the

community bears the direct cost of their medical treatment and the indirect, as well as

ancillary costs such as diminished work capacity, child care, etc.

There are other economic ramifications to the Wal-Mart explosion. When Wal-Mart

arrives in a town, “main street” erodes. Neighborhood stores that used to provide goods,

services and paid their workers well, are eliminated, uprooting families and ways of life

in the process. The Wal-Mart decision to saturate Oklahoma City, resulted in the closure

of 30 supermarkets.

If Americans shop with price being the only factor that determines where they

purchase their goods, doesn’t this mean the permanent down-sizing of our standard of

living? How can the local retail establishment survive when they can’t compete with a

Wal-Mart? Look at what has happened to the local supermarket, bookstore, hardware

and clothing store. The demise of these small business constitutes the loss of a middle

class of society in a community. We need to think: As consumers are we better off

paying a little more to enable the local merchants and their families to survive in order to

preserve the character of our communities and society or should we concern ourselves

with price only?

HERE IS YOUR DILEMMA:

You are the mayor of a small city in the West. You can’t worry about the 4,700 workers

at IBM and the other workers at technology companies who lost their jobs. Your problem

is a more local one.

A Wal-Mart representative has approached you about the possibility of building a super-

store within your city limits. The store would serve communities within a twenty-five mile

radius. The land that they intend to build upon would require new zoning. Wal-Mart

would expect a certain amount of property tax and other relief. If your city does not

want a super-store, you are certain that one of the other towns close-by would be happy

to accommodate their needs.

What studies would you require before deciding which way to vote? What ramifications

do you foresee with this new super-store? What would you ask of Wal-Mart before

agreeing to their request? How much input would you seek from the residents of your

city

By this point in the semester, you have a pretty good idea of what drives a company's net income. You've also read about ethics in business and what kinds of conditions are typically present in fraud situations (opportunity, justification, and pressure).

In your introductions, several of you indicated career goals around business ownership. Well, let's say that you own a small restaurant. The restaurant business is very competitive because diners have a variety of choices. Therefore, you must be very careful to manage costs without sacrificing quality in order to generate a profit. Recently, one of your key food suppliers announced a large price increase across the board. You are reluctant to switch suppliers because you feel the quality of your meals would suffer. You are also reluctant to increase your menu prices because you feel that might result in decreased business. However, one area where you could cut costs is associated with your kitchen staff. You could hire kitchen employees who are not legally authorized to work in the U.S. Because these potential employees have not followed the appropriate legal process, they are willing to work for lower wages. You also know that these employees would feel fortunate to have a job and would be very hard workers who didn't mind long hours. You know that some of your competitors have already hired employees illegally, but nothing has happened as a result. If you were to do likewise, you could cut your expenses significantly while holding your menu prices constant. Your customers would be able to enjoy the same quality meals at reasonable prices.

This restaurant provides the only source of income for you and your family. It's been in your family for over 50 years. Your parents started the restaurant and you took it over 15 years ago when your dad's health started to decline. The profits from the restaurant not only provide an income for you and your family but they also provide retirement income for your parents. Your dad's health has caused him to be in and out of the hospital several times over the past few years and insurance has not always paid for all the related expenses. Therefore, it's important to both your family and your parents that the restaurant continues to do well.

Would you decide to hire employees who were not legally authorized to work in the U.S.? If your decision was challenged by the local news team, what would you say in your defense? How did the knowledge that you've gained in the course so far play into your decision? Do you think this might be a real situation that you might encounter or it might be similar to a real situation that you might encounter?

In order to earn the maximum points, you must address all the questions posed here (2 points per question), using proper grammar. You will lose a half point for each grammar error.

Essay questions are due at the end of the course. It is strongly recommended that you accumulate your answers as you complete each unit and don't leave them all until the last minute. Please type your responses to the following short answer/discussion questions and short problems. Although your answers need not be lengthy (generally, 1-2 short paragraphs is fine), you should be careful to respond to all parts of the question asked. It is very important that your answers demonstrate that you have made the effort to read the chapter that relates to the question and thoroughly studied the relevant topic. Answers should be submitted in complete sentence and paragraph form, and writing presentation is important. Please remember that late essay questions are NOT accepted. 1. How is a "market" defined? Distinguish between an industry and a market. (1 point) 2. Suppose a market becomes more competitive over time. What happens to the elasticity of demand for a particular firm's good as its market becomes more competitive? (1 point) 3. Why are the monopolist's and the monopolistically competitive firm's demand curves downward sloping while the competitive firm's demand curve is horizontal? (1 point) 4. Why is a perfectly competitive firm's long-run supply curve the same as its marginal cost curve above the average total cost curve? (1 point) 5. Explain why monopolists do not achieve efficiency. (1 point) 6. Another student advocates the forced break-up of large firms, such as Microsoft and AT&T, on the grounds that they have a lot of monopoly power, which they use to charge inefficiently high prices. According to Schumpeter, would breaking apart these gigantic firms guarantee consumers lower prices? Explain. (1 point) 7. Explain why firms should not shut down in the short run until price falls below average variable cost. (2 points) 8. Suppose your economics professor publicly states that she grades on a curve (i.e., the top 10% of the students get an A, the next 20% get a B, the next 40% get a C, the next 20% get a D, and the lowest 10% fail). The whole class could save itself a lot of work by agreeing privately not to study at all for the final exam and just letting the rankings thus far determine the final grades. Why might such an agreement be difficult to maintain and enforce? Which market structure, if any, is this situation most analogous to? (1 point) 9. Why do firms practice price discrimination? Is efficiency affected by price discrimination? If so, how? (1 point)

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in