Assignment:
1. A firm produces 500 units per week. It hires 20 full-time workers (40 hours/ week) at an hourly wage of $15. Raw materials are ordered weekly, and they cost $10 for every unit produced. The weekly cost of the rent payment for the factory is $2,250. How do the overall costs break down?
2. A retailer has to pay $9 per hour to hire 13 workers. If the retailer only needs to hire 12 workers, a wage rate of $7 per hour is sufficient. What is the MC of the 13th worker?
3. If a firm's AC is rising, then
4. 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 MCs for each customer load level? What is the AC? If you are compensated $10 per ride, what customer load would you want?
5. Your insurance firm processes claims through its newer, larger, high-tech facility and its older, smaller, low-tech facility. Each month, the high-tech facility handles 10,000 claims, incurs $100,000 in fixed costs and $100,000 in variable costs. Each month, the low-tech facility handles 2,000 claims, incurs $16,000 in fixed costs and $24,000 in variable costs. If you anticipate a decrease in the number of claims, where will you lay off workers?
6. Some employers pay their workers with a hybrid compensation program which is composed of a flat salary plus incentive pay. For example, a pharmaceutical sales associate may be paid a base salary of $2,000 per month plus a 10% commission on their sales. The compensation scheme can be altered by offering more incentive for the workers (e.g., a lower base salary and a higher commission) or more safety and fairness for workers (e.g., a higher base salary and a lower commission).
A hybrid pay scheme may overcome some of the drawbacks of incentive pay that are noted by the authors. Suppose a firm uses sales teams to market their products. For example, a construction equipment manufacturer may assign three sales agents to a team so each team member can specialize in particular product functions (e.g., mechanical systems, electronic systems, and software systems). What are the potential drawbacks of hybrid pay for firms that employ sales teams? What are the drawbacks of hybrid pay for the members of the sales teams? Can we alter the hybrid scheme to overcome these drawbacks?