When Wal-Mart Decides to Build a New Retail Store in a Town

question 248

Multiple Choice

When Wal-Mart decides to build a new retail store in a town, it will decide to build a large store rather than a small store if the large store is expected to earn a greater economic profit. What other motive would Wal-Mart have for choosing to build a large store?

• A) A larger store will help Wal-Mart maintain its position as the leading retail company in the world more than a smaller store would.
• B) A larger store will give Wal-Mart greater political influence in the community.
• C) A larger store may deter entry into the town by a rival firm.
• D) Because of economies of scale, the average total cost of production is less for a larger store than a smaller store.

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Definitions:

Abstract Word

A word that represents an idea, quality, or state rather than a concrete object or physical thing.

Overconfidence Influence

The phenomenon where an individual's confidence in their judgments and abilities is higher than the accuracy of those judgments.

Retroactive Interference

The phenomenon where newly learned information interferes with the recall of previously learned information.

Hindsight Bias

The tendency to believe, after an event has occurred, that one would have predicted or expected the outcome, known also as the "I-knew-it-all-along" phenomenon.