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    Pete's copy center located in Boston, MA has three coin operated copying machines used primarily by Politicians to make copies of their confidential diaries and illegal agreements with foreign governments and corporations. The owner, Pete Salem, is a former Ricoh repairman and can fix a broken machine within 20 minutes on the average. Many times the machines are only jammed and he can get them working again quickly so the exponential will describe his repair time distribution. The time-to-breakdown of a freshly repaired copier averages 60 minutes and is also exponentially distributed.

    His revenue when all machines are working averages $80/hr per machine. When one machine is broken his revenue drops to $60/hr per working machine because of balking. When two machines are broken his revenue from the remaining machine decreases to $50/hr. When all machines are broken his revenue naturally drops to zero.

    a) Compute his average hourly revenue?

    b) If he employs a second, equally competent, repairman, what will be his total expected hourly income?

    c) What is the largest hourly wage he can pay the employee without decreasing the expected hourly income he earned when working alone?

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    Solution Preview

    Pete's copy center located in Boston, MA has three coin operated copying machines used primarily by Politicians to make copies of their confidential diaries and illegal agreements with foreign governments and corporations. The owner, Pete Salem, is a former Ricoh repairman and can fix a broken machine within 20 minutes on the average. Many times the machines are only jammed and he can get them working again quickly so the exponential will describe his repair time distribution. The time-to-breakdown of a freshly repaired copier averages 60 minutes and is also exponentially distributed.

    His revenue when all machines are working ...

    Solution Summary

    Pete's copy center located in Boston, MA has three coin operated copying machines used primarily by Politicians to make copies of their confidential diaries and illegal agreements with foreign governments and corporations. The owner, Pete Salem, is a former Ricoh repairman and can fix a broken machine within 20 minutes on the average. Many times the machines are only jammed and he can get them working again quickly so the exponential will describe his repair time distribution. The time-to-breakdown of a freshly repaired copier averages 60 minutes and is also exponentially distributed.

    His revenue when all machines are working averages $80/hr per machine. When one machine is broken his revenue drops to $60/hr per working machine because of balking. When two machines are broken his revenue from the remaining machine decreases to $50/hr. When all machines are broken his revenue naturally drops to zero.

    a) Compute his average hourly revenue?

    b) If he employs a second, equally competent, repairman, what will be his total expected hourly income?

    c) What is the largest hourly wage he can pay the employee without decreasing the expected hourly income he earned when working alone?

    $2.49

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