Q1. Starbucks is hoping to make use of its excess restaurant capacity in the evenings by experimenting with selling beer and wine. It speculates that the only additional costs are hiring more of the same sort of workers to cover the additional hours and costs of the new line of beverages. What hidden costs might emerge?
Q2. A copy company wants to expand production. It currently has 20 workers who share eight copiers. Two months ago, the firm added two copiers, and output increased by 100,000 pages per day. One month ago, they added five workers, and productivity also increased by 50,000 pages per day. Copiers cost about twice as much as workers. Would you recommend they hire another employee or buy another copier?
Q3. Game Day Shuttle Service: You run a game day shuttle service for parking services for the local ball club. Your costs for different customer loads are 1: $30, 2: $32, 3: $35, 4: $38, 5:$42, 6: $48, 7: $57, and 8: $68. What are your marginal costs for each customer load level? If you are compensated $10 per ride, what customer load would you want?
Q4. George's T-shirt Shop: George's T-Shirt Shop produces 5,000 custom printed T-shirts per month. George's fixed costs are $15,000 per month. The marginal cost per T-shirt is a constant $4. What is his breakeven price? What would be George's breakeven price if George were tosell50% more shirts? Suppose an initial investment of $100 will return $50/year for three years(assume the $50 is received each year at the end of the year). Is this a profitable investment if the discount rate is20%?
Q5. Probably the most important source of capital is human capital. For example, most medical doctors spend years learning to practice medicine. Doctors are willing to make large investments in their human capital because they expect to be compensated for doing so when they begin work. In Canada, the government nationalized the healthcare system and reduced doctors' compensation. Is this a form of post-investment hold-up?