Suppose that you are the assistant manager of AW-tronics, a large privately held online retailer that currently uses 27 unskilled workers and 16 semiskilled workers at its warehouse to box and ship the products it sells online.Your firm operates in highly competitive market, so it facing heavy price competition by its rival firms.

Your firm pays its unskilled workers the minimum wage but pays the semiskilled workers $18 per hour. Due to government legislation, the minimum wage in your state will increase from $10.25 per hour to $15 per hour.

Your firm also uses capital equipment that uses natural gas power, and other machinery that is electric. The price of electricity is expected to increase by 20 percent, while the price of natural gas is expected to remain relatively constant of the next few years.

There is some substitutability between the mix of different types of labor used, between the different types of machinery used, and between the labor and capital as inputs.

Discuss the implications of the legislation and the forecasting energy prices on your firm's operation. In particular, discuss the implications for your optimal mix of labor inputs, capital inputs, and long-run investment decisions? Be sure to discuss the marginal products as well as the narrow and broader implications of the manager's decision strategy.

Instructions:

The manager has good understanding of general strategic and sound business practices, but does not have a strength in understanding technical details and mathematical formulas, so any use of these details will need to be explained. Please make sure to address the economic and human ramifications of your recommendations.