2012_ch07_lecture_Production and Cost

EYE on RETAILERS’ COSTS

Which Store Has the Lower Costs:

Wal-Mart or 7–11?

The average total cost curve of operating a store of 2,000 square feet is

ATC7–11.

The average total cost curve of a store of 99,000 square feet is ATCWal-Mart.

The dark blue curve is a retailer’s LRAC curve.

EYE on RETAILERS’ COSTS

Which Store Has the Lower Costs:

Wal-Mart or 7–11?

With Q customers a week, the average total cost of a transaction is the same in both stores.

For a store that serves fewer than Q customers a week, the least-cost method is the small store.

EYE on RETAILERS’ COSTS

Which Store Has the Lower Costs:

Wal-Mart or 7–11?

With Q customers a week, the average total cost of a transaction is the same in both stores.

For a store that serves more than Q customers a week, the least-cost method is the big store.

Thanks for your attention

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