Starbucks Unit Brews Up Self-Serve Espresso Bars Automated, self-serve espresso kiosks have appeared in many grocery stores. The machines, which grind their own beans, crank out lattes, and drip coffees take credit and debit cards, and cash. Coinstar buys the kiosks for just under

$40,000 per unit, installs them, and provides maintenance. The self-serve kiosks remove the labor costs of having a barista. The kiosks use Starbucks’ Seattle’s Best Coffee and store personnel handle refills of coffee beans and milk.

Source: MSNBC, June 1, 2008

a. What is Coinstar’s total fixed cost of operating one self-serve kiosk?

b. What are Coinstar’s variable costs of providing coffee at a self-serve kiosk?

c. Assume that a coffee machine operated by a barista costs less than $40,000. Explain how the fixed costs, variable costs, and total costs of barista-served and self-served coffee differ.

d. Sketch the marginal cost and average cost curves implied by your answer to part (c).