Question 1:
Wal-Mart is the largest corporation in the world. During 2012, it made about $425 billion in sales, representing 1.9 percent of GDP in the U.S. Even during recession years, its sales have grown.
Explain what: (1) economics of scale; (2) economies of scope; and, (3) monopsony power have to do with Wal-Mart’s rapid expansion, large size, and high level of profitability.
Can Wal-Mart sustain such growth rates and, if it does, what is the logical end to this process?
Question 2:
Medical schools and hospitals are heavily involved in the training of new physicians. After prospective new physicians have graduated from medical school and have earned an M.D. degree, and perhaps have done an internship, nearly all do a “residency” for several years. During their residency, the new M.D.s typically are trained in a sub-specialty and work under the supervision of a veteran physician.
It costs both time and money to train and supervise residents. Rules adopted in 2010 limit the hours of a medical resident to no more than 80 per week, averaged over four weeks. (a) Keeping the Law of Diminishing Returns in mind, comment on the quality of teaching and learning that occur when a resident successively works her 60th, 70th, 80th and 90th hours in a week. (b) What general principle or rule can you specify that would tell residents and hospitals when adding an incremental hour of residency training and work during a specific week no longer is a good idea?
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