The Development Of The Malquiladora Industries In Mexico

1047 WordsJan 6, 20184 Pages
Economics Questions Question 1 If business is booming in a fast food restaurant and there is the potential to increase business with an increased output there may be two ways of increasing the output; by increasing the amount of labor used and by making capital investment, such as buying more equipment, such as a new grill and fryer. Management will have to decide which of the two strategies to follow. This can be assessed by looking at the marginal costs and marginal returns which may be created by the two choices. If the machinery is offering unused capacity, where the addition of more employees would increase the overall output, then simply hiring more employees for the shift would increase the output and increase sales. However, the ability to add more employees to increase output is limited, which can be appreciated with the law of diminishing returns, which may also be seen as the law if increasing relative costs (Rittenberg and Tregarthen, 2009). For example, if the restaurant has one person making French fries with the fryer and increases this to two people, using the same fryer they may increase output, but it may not double. If a third person is added then there may be some increase in output, but the benefit is likely to be less than the firm saw when adding the second person. Furthermore, there may not be room for a third person, and they may only have a small impact on the production level. The increase of one input without an increase in another will see
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