Instructions:
Please, read the case below and respond to the situation/question below. This assignment should be around 250 words including only the answers. I have added Chapter 5 to use for text citation and concepts.
Professor’s instructions: Prior to your analysis, you should provide a
ief summary of the case, a paragraph or so in your own words with in text citations. You then can choose to answer the questions in paragraph form or type the question and then answer it. Either way is fine, but I do require that your answers have in text citations to support what you are saying. Some of the questions are your opinion, but you should also support that with concepts from the text.
Citation will be:
Brickley, J., Smith, C., & Zimmerman, J. (2016). Managerial economics and organizational architecture (6th ed.). New York: McGraw-Hill Education.
ANALYZING MANAGERIAL DECISIONS: Choosing the Mix of People and Machines in a Retail Supercente
You manage a large retail supercenter that sells groceries and other products to 30,000 customers per week. Cu
ently, you employ 80 checkout clerks and 10 automated check-out machines (customers scan and pay for their purchases without a clerk’s assistance). Each clerk is paid wages and fringe benefits of $800 per week. It also costs you $800 per week to lease each machine (price includes installation, software support, and servicing). A vendo
has offered to lease your additional machines at this price. You estimate that by leasing 10 more machines you can meet your service requirements with 30 fewer clerks. Should you lease the additional machines or continue to service your customers with your cu
ent input mix?
1. You conduct additional analysis and estimate that you can service the 30,000 customers with the following combinations of clerks and ma- chines. Calculate the total costs for each of these combinations. What combination of inputs serves the customers at the lowest possible cost?
2. Plot the input combinations in the table on a graph that contains clerks on the vertical axis and machines on the horizontal axis. Connect the points by lines to approximate an isoquant as pictured in Figure 5.6. Add the cost minimizing isocost curve to the graph (you can derive this line from the input prices and the total cost of the low-cost input combination). How do the slopes of the isocost curve and isoquant compare at the optimal input combination?
3. Suppose that the marginal product of clerks at the optimal input combination is 500. Explain in words what this means. What is the marginal product of machines at this point? Explain why.
4. Suppose that the cost of leasing a machine declines to $500 per week. What is your new optimal input mix? How does this affect your graph?
5. Are there any other factors that should be considered in making this decision on the optimal mix of machines and clerks Discuss
iefly.
Chapter 5: