32 Mr. Sze is the owner of a Chinese restaurant. The quantity of equipment used in his restaurant is fixed. He observed the following decrease in daily output of dim sum when some cooks are absent from work due to sickness: Number of sick cook(s) absent Decrease in daily output from work (units of dim sum) 40 90 3 150 220 5 300 a) Is Mr. Sze's restaurant operating in the short run and why? b) Is law of diminishing returns illustrated in Mr. Sze's restaurant? [Hint: Suppose the restaurant employs 5 cooks, and the total product is 300 units of dim sum per day. Observe the change in marginal product when more cooks are added.] c) The following list shows some of the cost items of Mr. Sze's restaurant: . Business registration fee . Wages of cooks . Fire insurance premium . Electricity charge . Water charge . Commercial telephone line charge Identify the fixed cost(s) and variable cost(s) in the above list and provide explanation for your answers.b) The owners of a grocery store currently have theirclerks enter the prices of items into the cash register by hand instead of using scanners. They are considering changing to an automated system where a laser beam would read the Universal Product Code (UPC) from the item and enter it. A clerk would still be needed but he or she would be able to enter prices much more quickly. Each clerk is able to enter an average of 360 items per hour by hand. The store currently sells 3,600 items per hour and employs 10 clerks. Clerks are paid $6.00 per hour, including all fringe benets and payroll taxes. The xed costs of this manual system are zero. Under the current manual system. what is the average total cost of processing an item of groceries? What is the average variable cost? A sales representative tells the owners that they can process the same amount of groceries with only 6 clerks if they purchase one of the automated systems. The automated system raises each clerk's output to 600 items per hour. The total cost of the automated system is $20 per hour. (This is the total cost spread out over the system's expected life.) Of course, the owners must pay for the system whether they sell groceries or not. Using an automated system, what are the average total cost and average variable cost of processing an item if the store sells 3,600 items per hour? At the current sales level, should the owners buy the automawd system? Explain. Suppose a new store is expected to open in the area and the owners estimate that their sales will fall to 2,400 items per hour. Does this change the owners' decision? Explain and illustrate their decisions in the twocases with an appropriate graph. [Hint: Assume that the quantity of labour is perfectly divisible, i.e. the owner can hire a worker for a fraction of an hour.]