Question

According to Craig Johnson, president of retail consulting group Customer Growth Partners “Wal-Mart’s foray into organics should help to bring down prices for consumers.” Which of the following statements supports Mr. Johnson’s argument? a. Wal-Mart has a reputation for deliberately lowering prices to force its competitors out of the market. b. Wal-Mart is large enough that it can successfully pressure the U.S. Department of Agriculture to force organic food farmers to lower their prices. c. By expanding the organic market, Wal-Mart would bring in economies of scale that would, when added to a competitive market, drive down prices. d. Wal-Mart’s core customer base is the low-income consumer. Therefore, to compete for this customer group organic food farmers will be compelled to lower prices.

Answer 1

Option C.

Lowering of prices of organic goods is supported by the argument which states that by expanding the organic market, Wal- Mart would bring in economies of scale that would, when added to a competitive market, drive down prices because of lowering of the average cost of production as the production of the good expands. Thus, Option C is correct.