What Should a Small Retailer Do When It Uses the Competition-Oriented

question 17

Essay

What should a small retailer do when it uses the competition-oriented method for setting prices, and sees that it cannot compete with Walmart's prices?

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Definitions:

Diminishing Returns

An economic principle where the addition of a variable factor to a fixed factor leads to a decrease in the marginal output of the variable factor beyond a certain point.

Variable Factors

Components of production that can be adjusted in the short term to change the output level, such as labor and raw materials.

Economies of Scale

A situation where the cost of producing one unit of a good decreases as the volume of production increases.

Diseconomies of Scale

The phenomenon where, beyond a certain point, the cost per unit increases as a company continues to grow in size and output.