Question

Suppose that a delivery company currently uses one employee per vehicle to deliver packages. Each driver delivers 30 packages per day, and the firm charges $10 per package for delivery.

Instructions: Enter your answers as whole numbers.

a. What is the MRP per driver per day?

b. Now suppose that a union forces the company to place a supervisor in each vehicle at a cost of $150 per supervisor per day. The presence of the supervisor causes the number of packages delivered per vehicle per day to rise to 40 packages per day. What is the MRP per supervisor per day?

    

     By how much per vehicle per day do firm profits fall after supervisors are introduced?

    

c. How many packages per day would each vehicle have to deliver in order to maintain the firm’s profit per vehicle after supervisors are introduced?

    

d. Suppose that the number of packages delivered per day cannot be increased but that the price per delivery might potentially be raised. What price would the firm have to charge for each delivery in order to maintain the firm’s profit per vehicle after supervisors are introduced?

    

Answer 1

Solution:-

(a). MRP = 30 * 10 = $300

(b). MRP = (40 - 30) * $10 per package
= 10 * 10
= $100

Initially profit is $300

After Supervisor, profit = TR - TC
= (40 * 10) - 150
= 400 - 150
= $250
So, Profit Fall by $50

(c).To cover the supervisor cost, per vechicle has to deliver 15 more packages i.e. $150/10.
Therefore, per day each vehicle has to deliver 45 packages.

(d).TR which firm need to cover supervisor cost = 30 * 10 + 150 = $450
No fo packages = 30

New price will be = P * Q = TR

P * 30 = 550
P = 550 / 30
= 18.33