Site icon Econ Eye

Hotels Say Hello to Robots as Workers Stay Scarce

EconEye Admin

Garden City Hotel is feeling grateful for the Whiz. The robot vacuum doesn’t mind working late or on weekends and holidays. Robots like the Whiz that cost $30,000 help the hotel cope with lower levels of post-pandemic staffing. Labor costs range from $10 to $16 an hour.—npr.org

Answer the following questions to check your understanding of the story.

Are the costs of robots and labor fixed or variable?

The cost of a robot is a ____________ cost and the cost of labor is a ____________ cost.

Wrong! - A variable cost is the cost of a variable factor of production. A fixed cost is the cost of a fixed factor of production. Is a robot a variable or a fixed factor of production? Is labor a variable or a fixed factor of production?

Correct! - A robot is capital, and capital is a fixed factor of production. The cost of a robot is a fixed cost. Labor is a variable factor of production. The cost of labor is a variable cost.

How does average total cost change as more rooms are vacuumed by the Whiz, and how does average total cost change as more rooms are vacuumed by hiring more labor?

Average total cost ___________ as more rooms are vacuumed by the Whiz, and average total cost ___________ as more rooms are vacuumed by hiring more labor.

Wrong! - The cost of vacuuming by robot is a fixed cost. How does average fixed cost change as more rooms are vacuumed? The cost of vacuuming by labor is a variable cost. How does average variable cost change as more rooms are vacuumed?

Good Job! - The cost of vacuuming by robot is a fixed cost. Average fixed cost falls as more rooms are vacuumed, which decreases average total cost. The cost of vacuuming by labor is a variable cost. As more labor is hired to vacuum rooms, average variable cost initially decreases and then increases, which increases average total cost.

Exit mobile version