Research Paper Checkpoint of Microeconomics

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RESEARCH PAPER
CHECKPOINT 1
Microeconomics

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Contents
Introduction................................................................................................................................3
Problem statement......................................................................................................................3
The solution to problem.............................................................................................................3
Ethical social responsibility implication of the approaches.......................................................4
Recommendation........................................................................................................................5
Conclusion..................................................................................................................................5
Reference....................................................................................................................................6

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Introduction
Macroeconomic problems are inevitable in the operation of the firm and effective mitigation
of the problem creates the path to success. Wal-Mart is one of the largest multinational retail
companies headquartered in Bentonville, Arkansas, USA. The company has more than 7000
stores and 114 warehouses in the USA. One of the major microeconomic problems currently
faced by the company is the negative reputation among the customers due to its current waste
management policy. This paper aims to discuss the problem of the company from the
perspective of the literature of microeconomics.
Problem statement
There are around 114 warehouses of the company which are used for the collection and
storage of various products acquired from vendors. Kreps (2019) stated that most of the
warehouses of the company are located in semi-urban or rural areas. Now, the problem is the
company has been under warning several times for failing to dump the waste in a proper area
that has resulted in high penalty cost for the company. The local government penalise the
company on the grounds of harming the environment surrounding the warehouses of the
company. This has also reflected in the deteriorating brand reputation of the company which
also have impacted the sales of the company. This waste management problem from the side
of the company is there in most of the warehouses of the company. From the perspective of
the company, this is a problem as it has been paying a lot to the government as a form of
penalty which it intends to cut down now.
Economically, the problem for Walmart lies in the fact that the company does not internalise
the social cost of operation of the warehouses. That means the waste generated from the
warehouses are mostly dumped in the nearby lakes or field which reduces the quality of the
environment. Therefore, the market equilibrium is achieved by the company simply based on
the private cost of production and the social cost is not included (Taylor, 2018). Thus, based
on the private cost, the warehouses of Walmart dump high quantity of wastes in the
environment leading to a penalty and bad reputation of the company. In terms of economic
literature, this problem is known as negative externality where a firm produces at a certain
level without considering the social cost of production.