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Fixed and Variable Inputs in the Transportation Business

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Jennifer Trucking Company operates a large rig transportation business in Texas that transports locally grown vegetables to San Diego, California. The company owns 5 large rigs and hires local drivers paid fixed salaries monthly, regardless of the number of trips or tons of cargo that each driver transports each month. The below table presents details about the number of drivers and the total cargo transported by the company at different staff levels.

a. Which inputs are fixed and which are variable in the production function of Jennifer Trucking Company? Over what ranges do there appear to be increasing, constant and/or diminishing returns to the number of drivers employed?

b. What number of drivers appears to be most efficient in terms of output per driver?

c. What number of drivers appears to minimize the marginal cost of transportation assuming that all drivers are paid the same salary?

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Solution Summary

The solution describes and differentiates fixed and variable Inputs, and its roles in the determination of marginal cost in a trucking company with large rig transportation business in Texas.

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On Fixed and Variable Inputs:

Fixed Input
-Salary of drivers

Variable Inputs
-Fuel cost for the vehicles

On ranges of increasing, constant and/or diminishing returns to the number of drivers employed:
The output per driver was computed using the formula, Output per Driver = Total Cargo Transport / Drivers ...

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