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In some places it is common for large supermarkets to stay open 24 hours a day
In some places it is common for large supermarkets to stay open 24 hours a day. 1. Suppose you walk into a large supermarket at 2 am with a friend to buy some blank CD-Rs. Your friend says, "I can't believe that these stores stay open all night. Only one out of fifteen checkout lines is open. There can't be more than ten shoppers in this store. It just doesn't make any sense for this store to be open all night." Keeping in view the perfectly competitive market structure, explain to your friend what conditions must be true for it to be to the advantage of the supermarket to stay open all night. 2. Are the costs of rent, equipment, fixtures, salaries of management, and so on, relevant when the supermarket makes the decision whether to stay open at night? Why? 3. If the supermarket had the same number of customers during its daytime hours as you observed during its nighttime hours, do you think it would continue to operate? Explain.
Expert Solution
1. Super market to stay open all night .
The total revenue at night will increase variable cost or it might be equal in variable cost . cost incurred because staying open for extra hours in electricity, wages of night shift workers and many more. The true condition of super market staying open in all night.
2. No, the cost of rent, equipment, fixture , salaries of management. These costs that cannot be recovered even if the super market choose not to operate in night.
3. Not probably that the revenue earned in the night would recover fixed cost and variable cost. Because staying open additional hours at night it depends on total revenue equals or increases variable cost. The decision in the market in the long run, it depends on the total revenue or increase in total cost. It is unlikely.
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