If you shop at an Amazon, Go convenience store, you can scan your smartphone as you enter
Question:
If you shop at an Amazon, Go convenience store, you can scan your smartphone as you enter the store. Cameras and sensors track your path through the store, and software records each item you take from the shelves. As you leave the store, your credit card is automatically charged for the purchases. These stores don’t have any checkout lines, cash registers, or cashiers. Although in early 2019, Amazon operated just a few Amazons Go stores, it had plans to open as many as 3,000 such stores by 2021. Suppose that using this “Just Walk Out” technology reduces the fixed cost of operating a convenience store but doesn’t affect the marginal cost of selling a quart of milk or other goods.
a. Draw a graph similar to panel (a) of Figure 13.5 to show the effect of installing Just Walk Out technology in a convenience store that previously used a conventional checkout process with cash registers and cashiers. Your graph should use the information in the problem to determine whether any of the store’s cost curves have shifted. Your graph should show any changes in the store’s profit-maximizing price and quantity and in the area representing the store’s profit. Assume for simplicity that quarts of milk are the only product the store sells.
b. An article on the fool.com website had the headline “Amazon Go Stores Could Be Incredibly Profitable.” Would we expect that Amazon will earn an economic profit from its Amazon Go stores in the long run? Briefly explain.
Step by Step Answer:
Step 1 Review the chapter material This problem is about the long run for a monopolistically competitive firm so you may want to review the section Wh...View the full answer
