Question

Fast-food restaurants like McDonald’s are replacing cashiers with touch-screen ordering kiosks. Currently, the marginal product of another cashier is 48 customers served per hour; the marginal product of another kiosk is 32 customers served per hour. A cashier can be hired for a wage of $10; a kiosk rents for $12.
a. Is McDonald’s currently minimizing the cost of serving its customers?
b. Show how McDonald’s can improve its profits by changing its input mix.

Answer 1

a. Is McDonald’s currently minimizing the cost of serving its customers? McDonald's currently is maximizing the cost of serving it's customers because the cost of hiring a kiosk is hire and the number that kiosks will be serving lower than those being served by the cashier.

They can increase their profits by hiring more cashiers than the automatic kiosks that are being run by more money than the average selling of each.