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I have never had to use this before, but I am running into dead ends.Please help me.
I am working on a essay from questions for school and I need a little help. I have answered most of my paper, but I have 4 that I need help with.
I have chosen Wal-Mart as the company to use in my paper.
1) Is this company operating in a perfectly competitive market? Why or why not?
I believe that this would be no because the prices can change so drasticly due to competition. Is that correct?
2) If the owner of the company asked you to assess whether or not they were using the optimal amount of an input (given a set price for that input), what economic criterion would you use in your analysis?
I am totally lost here. They gave us simulations in class to play with, but I am having trouble understanding how the simulations went along with this question.
3) If you were asked to assess the economic profitability of this company, what economic tools would you use in your analysis?
I am not sure understand what it means by tools. Would this be finacial statements?
4) What is the elasticity of demand for the product (or one of the products) that is produced by the company? Given this elasticity of demand, how should the company price their product in this market? Give justification for your answer.
Would it be strategic pricing to go along with the competition to increase sales?
Thank you for your time and help.

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Solution Preview

The response addresses the queries posted in 713 words with references.

//Before writing about the economic criteria, it is essential to gain knowledge about the competition that Wall Mart facing is in the market. One should know about the form of competition, which further will assist in analyzing the economic criteria in an effective manner//

Wal-Mart

1.

No, the Wal-Mart is not operating in a perfectly competitive market because in this market, due to the large number of sellers and product homogeneity, Company is not capable of determining price through its own behavior. Another great reason is that there is few number of large producers or competitors of the Wal-Mart I.e. Kmart, Target, etc. And Wal-Mart bases its market policy or strategy ,on the expected behavior of a few close rivals because it knows its Competitors pretty well and keeps a close watch on their actions.

Wal-Mart trades its homogenous product with some close substitutes, in order to defect its Competitors. In Wal-Mart all the pricing decisions depend on the demand conditions, cost conditions and pricing strategies of its Competitors and other various characteristics of non perfect competition like interdependence in decision making, sticky prices and much non-price competition, etc. Exist in the Wal-Mart. Thus, it allows the Company to occupy a dominant position in the Industry (O'Connor, 2004).

//Above is the discussion of competition and its pattern that Wall Mart is facing ...

Solution Summary

The response addresses the queries posted in 713 words with references.

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