Relevance of costs and productivity in production.

Hypothetical case study: Cost efficiency of garage services

Suppose you run a business of a chain of garage services in a big city. You are probably aware that the business is using inputs such as workers, shop spaces, equipment and information technologies (which are for connecting services between your garage shops and management of material uses in the garages), as well as online order systems, to supply the outputs of repair-care-installment services for the vehicles. Assuming currently, you receive more orders (number of vehicles) to serve and have the increasing number of mechanic workers in several shops while you have not updated equipment and machinery yet. You would want to lower your production costs and look into the alternative combinations of different inputs. You would want to examine if any problem of diminishing marginal return occurs in a garage of yours and the way to correct it if the diminishing return problem exists. In addition, since you plan to operate your garage services on a larger scale (more shops in the chain or more spaces and capacity of the shops), you would want to examine the possible ways to achieve economies of scale.

1. What information on the production function do you need to discover for examination of the diminishing marginal return problem? What are the measures in production and costs which help you to correct the problem?

Make sure you provide the definition of the diminishing marginal return problem, demonstrate the problem in functions and use hypothetical numbers and calculations to illustrate it.

2. For the plan of production expansion on a larger scale, what are the possible methods of production to gain economies of scale in the context of a chain of garage services? What is the likely role of information technologies (IT) applied in your chain of garages for your organization to achieve cost efficiency?

Hypothetical numbers and calculations are not required. The answer to this sub-question can be in normative statements.

Thank you for your answer!!