Problem 1
Which of the following news items involves a short-run decision and which involves a long-run decision? Explain. January 31,2008: Starbucks will open 75 more stores abroad than originally predicted, for a total of 975 February 25,2008: For three hours on Tuesday, Starbucks will shut down every single one of its 7,100 stores so that baristas can receive a refresher course. June 2,2008: Starbucks replaces baristas with vending machines. July 18,2008: Starbucks is closing 616 stores by the end of March.
Problem 6
Explain how it is possible for a firm to experience simultaneously an increasing average product but a diminishing marginal product.
Problem 10
Sue's Surfboards rents a factory. If the rent rises by \(\$ 200\) a week and other things remain the same, how do Sue's Surfboards' short-run average cost curves and marginal cost curve change?
Problem 11
Workers at Sue's Surfboards negotiate a wage increase of \(\$ 100\) a week per worker. If other things remain the same, explain how Sue's Surfboards'short- run average cost curves and marginal cost curve change.
Problem 15
Jobs Boost as Lidl Unveils Plans for \(£ 20 \mathrm{m}\) Warehouse Expansion The German supermarket giant Lidl has plans to expand its distribution centre in County Antrim and open additional stores across Northern Ireland. The company is already recruiting new employees to facilitate its growth and expansion plan. Throughout the build, it could be employing more than 100 construction workers as well. Source: Belfast Telegraph, June 12,2015 a. Which of Lidl's decisions described in the news clip is a short-run decision and which is a long-run decision? b. Why is Lidl's long-run decision riskier than its short-run decision?
Problem 16
You have good tickets to a basketball game an hour's drive away. There's a blizzard raging outside, and the game is being televised. You can sit warm and safe at home and watch it on \(\mathrm{TV}\), or you can bundle up, dig out your car, and go to the game. What do you do? Source: Slate, September 9,2005 a. What type of cost is your expenditure on tickets? b. Why is the cost of the ticket irrelevant to your current decision about whether to stay at home or go to the game?
Problem 21
Explain why the gap between ProPainters' total cost and total variable cost is the same no matter how many houses are painted.
Problem 22
For Pepsi, a Business Decision with Social Benefit PepsiCo has done a deal with 300 small Mexican farmers close to their two factories to buy corn at a guaranteed price. PepsiCo saves transportation costs and the use of local farms assures it access to the type of corn best suited to its products and processes. "That gives us great leverage because corn prices don't fluctuate so much, but transportation costs do," said Pedro Padierna, president of PepsiCo in Mexico. Source: The New York Times, February 21,2011 a. How do fluctuations in the price of corn and in transportation costs influence Pepsico's shortrun cost curves? b. How does the deal with the farmers to avoid fluctuations in costs benefit PepsiCo?
Problem 30
Use the following news clip to work Problems 30 and 31 THAI to Downsize and Reduce Routes In the face of severe losses, Thai Airways International has drawn up a rehabilitation plan. The plan includes reduction of the airline's staffing from 25,000 to 20,000 and cancellation of its non-performing routes. It will also sell 22 old aircraft and decommission 14 Boeing 747 400 and Airbus \(A 340-600\) craft. Source: Vietnam Breaking News, May 30, 2015 Thinking of an airline as a production plant, explain why Thai Airways is making a decision to sell 22 old aircraft? Is Thai Airways's decision a long- run decision or a short-run decision?
