Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Chapter 5, Problem 16PAA
To determine
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A Nike women's-only store in California offers women's running, training, and sportswear products and also contains an in-store fitness studio for group and personal fitness training sessions. The store consistently earns profits in excess of $455,000 per year and is located on prime real estate in the center of town. The store owner pays $18,000 per month in rent for the building. A real estate agent approached the owner and informed her that she could add $7,300 per month to her firm's profits by renting out the portion of her store that she uses as a fitness studio. While the prospect of acquiring this rental income was enticing, the owner believed the use of that space as a fitness studio was an important contributor to her store's profits.
What is the opportunity cost of continuing to operate the fitness studio within the store?
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Note:-
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Bloomswood Hotel is situated in Forkland, a picturesque town in the mountain region of a country. Allen Grabos works as a gourmet chef at the hotel that caters mostly to tourists. In a conversation with his wife, Delia Grabos, Allen claims that he is underpaid. The hotel makes up to $500,000 per year but his annual salary is only around $28,000 a year. Delia, however, is of the opinion that since new hotels and inns are expected to open in Forkland, the salaries paid to hotel staff in the area should increase.
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Charles's Performance Pizza is a small restaurant in Houston that sells gluten-free pizzas. Charles's very tiny kitchen has barely enough room for the
two ovens in which his workers bake the pizzas. Charles signed a lease obligating him to pay the rent for the two ovens for the next year. Because of
this, and because Charles's kitchen cannot fit more than two ovens, Charles cannot change the number of ovens he uses in his production of pizzas in
the short run.
However, Charles's decision regarding how many workers to use can vary from week to week because his workers tend to be students. Each Monday,
Charles lets them know how many workers he needs for each day of the week. In the short run, these workers are variable
inputs, and the
ovens are fixed
inputs.
Charles's daily production schedule is presented in the following table.
Fill in the blanks to complete the Marginal Product of Labor column for each worker.
Labor
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Marginal Product of Labor
(Number of workers) (Pizzas)…
Chapter 5 Solutions
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