In? 2016, Walmart closed 150 stores in the United States and deeply discounted t
ID: 1163382 • Letter: I
Question
In? 2016, Walmart closed 150 stores in the United States and deeply discounted the merchandise in them. Some people bought the merchandise at these low prices and resold it on? Amazon, eBay, and other sites. An article in the Wall Street Journal described one reseller? who: "sent three employees in a? 26-foot truck to the nearest closing? Walmart, about 160 miles south.... They hauled off? $35,000 in? merchandise, like Legos and Star Wars? pajamas, which he said he expects to sell for as much as? $100,000 on? Amazon."
?Source: Greg? Bensinger, "Wal-Mart Closures Bring Out the Amazon? Sellers," Wall Street
Journal?,
January? 29, 2016.
Is the reseller making a? $65,000 profit on these? goods? Briefly explain.
A.
?Yes, the seller is making a? $65,000 profit because his revenue is? $100,000 and his cost is? $35,000.
B.
?No, the seller is making less than? $65,000 because he incurs transactions costs.
C.
?No, the seller is making less than? $65,000 because it is not possible to earn arbitrage profits in this market.
D.
?Yes, the seller is actually earning a? $100,000 profit because the? $35,000 is a sunk cost.
Is the reseller exploiting the people who buy these goods from him on? Amazon? Briefly explain.
A.
?Yes, because most people? wouldn't buy these goods if they? weren't so readily available to purchase on Amazon.
B.
?No, because the buyers of these goods face transactions costs.
C.
?Yes, because the people buying these goods from Amazon are being forced to buy them at a higher price.
D.
?No, because the people who bought these goods must have been made better off by purchasing these goods.
Explanation / Answer
If the reseller sells Legos and stars war pajamas on Amazon by $100000 which is bought from merchandise at $35000. If there were no transaction cost then the profit will be $65000. But the reseller sent three employees in a 26-foot truck to the nearest closing Walmart which is about 160 miles south. So the reseller must incur some transaction cost that will be deducted from $65000 to make a net profit.
Therefore the option B is correct.