A Grocery Chain Is Considering the Installation of a Set

question 110

Essay

A grocery chain is considering the installation of a set of 4 self-checkout lanes. The new self-checkout lane setup will replace 2 old cashier lanes that were staffed by a cashier and bagger on each lane. One cashier mans all 4 self-checkouts (answering questions, checking for un-scanned items, taking coupons, etc). Checkout on the new lanes takes 2 minutes (customers bag their own orders) while checkout with the old lanes took only 45 seconds. In addition the electricity costs for both setups are $.05 per checkout while bagging (material) costs are $.1 per checkout with the old system and $.15 for the new system. The new lanes also require $100 in capital costs. Assume that the lanes are always in use for 8 hours per day (1 shift) and that a worker makes $10/hour.
a. How many checkouts did the old system provide in a shift?
b. How many checkouts does the new system provide?
c. What is the multifactor productivity for each system?

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Definitions:

Land-Scarce

A situation where the availability of usable land is limited, often leading to higher property values and intensified use of land.

Wages

Payments made to workers for their services, usually calculated on an hourly, daily, or piecework basis.

Rents

Payments made for the use of property or land, often reflecting the value derived from its use.

Comparative Advantage

The ability of an individual or country to produce a good or service at a lower opportunity cost than others, underpinning international trade.