The market for toys during the holiday season is intensely competitive. Before the 2018 holiday season, Toys
Question:
The market for toys during the holiday season is intensely competitive. Before the 2018 holiday season, Toys “R” Us and the Bon-Ton department store chain had closed, and Sears had closed many of its stores. In previous years, all three had sold substantial quantities of toys. An article in the Wall Street Journal quoted the chief financial officer of Kohl’s department stores as saying that many of its stores were “being favorably affected by department-store-competitor store closings.” Draw a graph showing the effect on a representative Kohl’s store of the exit from the toy market of Toys “R” Us and Bon-Ton. Be sure that your graph includes the Kohl’s store’s demand, marginal revenue, marginal cost, and average total cost curves. Your graph should show changes in any of the curves. It should also show any changes in the area representing the store’s economic profit (or loss). Be sure to explain any assumptions you are making.
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