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    student007's Avatar
    student007 Posts: 60, Reputation: 2
    Junior Member
    		  
    #1

    Mar 15, 2006, 09:34 AM
    Help - external costs
    Okay. Here's a situation, and I cannot find any external costs. Can someone help me please?

    A huge superstore wants to open up in a small town. This will result in nearly all local SMEs to shut down, and will result in a net loss in employment. Also, the store is locating in a cheap, shoddy buildling, and will therefore reduce the aesthetic pleasantess of the town.

    Are there any external costs here? Because I can't find any
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
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    #2

    Mar 15, 2006, 12:17 PM
    What are SMEs? How does your text define external costs?
    Curlyben's Avatar
    Curlyben Posts: 18,514, Reputation: 1860
    BossMan
    		  
    #3

    Mar 15, 2006, 01:36 PM
    Scott,
    SME = Small and (to) Medium Enterprises (less than 200-500 permanent employees) ;)
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    ScottGem Posts: 64,966, Reputation: 6056
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    #4

    Mar 15, 2006, 02:01 PM
    That's one definition ;)
    fredg's Avatar
    fredg Posts: 4,926, Reputation: 674
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    #5

    Mar 16, 2006, 07:05 AM
    Hi, student,
    The SME's definition ("Small and (to) Medium Enterprises (less than 200-500 permanent employees") given by another answer seems to be the one to which you refer. Since a business is opening up, it fits. We don't need another definition.
    If the store is locating in a cheap, shoddy building, there shouldn't be any change to the "aesthetic pleasantess" of the town. The building is already in that condition.
    The only external costs I can see would be the un-employment impact on the town, when the small businesses shut down. Those employees will not be spending as much money in the town, causing loss of income to those businesses still open.
    Also, if the new business doesn't have the products wanted by the town and surrounding people, they will possibly go to another town to do their shopping.
    Is this what you mean by "external costs"?
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
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    #6

    Mar 16, 2006, 09:14 AM
    Personally, I prefer to get a full understanding of what the question is before I guess as to the answer. I would still like to know how external costs are being defined, since there are several possibilites. Its not clear whether its cost being incurred by the company or by the locality. It could be infrastrucutre, community development or several other things.

    If you want more help, please give us more info so we can give you a more concrete answer and less of a guess.
    fredg's Avatar
    fredg Posts: 4,926, Reputation: 674
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    #7

    Mar 16, 2006, 09:31 AM
    Hi,
    I agree with the answer before this one; in reference to please post back with "external costs".
    It would help tremendously to know if this refers to the new store, or to the town as a whole. I did take it originally to mean any external costs, and that would be a good educated guess, as this is what communities look at when approving location for a very large super-store. They look at all impacts.
    One area to look at would be the town's tax base. Would the larger store be paying enough taxes to make up for the loss from the smaller businesses that would be forced to close down?
    Also, what impact would the larger store vs. the smaller closed business have on town utilities? Such as electric bills paid to the local electric company? Water bills for the town? etc. Best wishes.
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