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Homework answers / question archive / 1)Business is booming at the local McDonald's restaurant
1)Business is booming at the local McDonald's restaurant. It is contemplating adding a new grill and french-fry machine, but the day supervisor suggests simply hiring more workers. How should the manager decide which alternative to pursue?
2) Suppose that the average age of students in your economics class is 23.7 years. If a new 19-year-old student enrolls in the class, will the average age in the class rise or fall? Explain how this relates to the relationship between average and marginal values.
Answer:
1. In order to provide the uninterrupted service with the usage of new technology, the supervisor of the local Mcdonald's restaurant need to take and execute the best managerial plans.
It is always the responsibility of the manager to select the choice of optimum usage of allocating resources. In this case, two alternative options are waiting for the supervisors choice. If the supervisor wishes to purchase the new grill and french-fry machine, He needs to consider the sunk cost and asset depreciation value. As depreciation value of the machinery reduces year to year its marginal utility to produce the products will not increase with average revenue in each year. But when the supervisor prefers the choice of hiring more employees, the service of the employees can be improved to a greater extent and the increase in employees will lead to maintenance of the quality preparation of the food. It also boosts the reputation for the firm in the long-run period. The Marginal productivity of the employees will increase with the Average cost and the Marginal cost of producing the more output per unit.
2.Fixed costs are incurred on those factors of production that cannot be altered in quantity and the same costs are thus borne regardless of the level of output. This is true of the short run as certain inputs such as capital or machinery cannot be changed in a short span of time. In the long run however, there is adequate time to alter all inputs and thus the costs incurred on the earlier fixed inputs are now variable. Hence, in the long run, fixed costs don't exist.
The average age of the class will fall as the new student's age is lower than the current average and will hence pull it down. The marginal value here is 19 which is the addition to the total age of the class, while the average age is currently higher than that(23.7) This relates to the relationship between average and marginal values as it holds that if the marginal value is lesser than the average value, then average values declines, which is seen in this case.
