Swing shift Your firm prints the novelty baseball cards that candy makers includ
ID: 1166015 • Letter: S
Question
Swing shift
Your firm prints the novelty baseball cards that candy makers include in their bubblegum. Since you regularly sell 100,000 cards per week, you invested in four separate production lines that can each produce 25,000 cards in a standard 40 hour work week. Now a few of the candy makers are increasing their orders so that you will need to produce 150,000 cards per week, at least temporarily. If you produce these cards by adding a swing shift from 4pm to midnight, you will have to pay workers time and a half. What does this imply for the shape of your short-run marginal cost curve? What does it imply for your pricing?
Explanation / Answer
Solution-
As the production increases temporarily, there is no possibility of paying for investing in additional production lines. With an additional shift, the labor will be more expensive. The increase or decrease in the short run rate is based on the variable cost and the rate of production, thus increasing the cost of the workers increases the cost of short-run margins. This indicates that it is necessary to increase product prices to maintain value-of-cost margins.
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