Suppose the manager of The Wandering Goat coffee shop is trying to minimize costs.

The Wandering Goat produces lattes using labor from Baristas (B), different Varieties

of coffee beans (V), and Espresso Machines (E). The table below lists the costs of these

inputs as well as their marginal products at her current input allocation.

In the short-run, she can change how many Baristas (B) she has on staff and how

many Varieties of coffee beans she has (V). Espresso Machines (E) are complicated and

expensive so she can only change E in the long-run.

Input	Price of Input	Marginal Product
Baristas (B)	$10	10
Varieties of coffee (V)	$200	200
Espresso Machines (E)	$500	400

For each of the following time-horizons, indicate whether or not the manager is allocating her inputs in a cost-minimizing way. Explain why. If not, indicate the direction she should change her inputs if she is not cost-reducing.

(a) In the short-run, when she can only vary Baristas (B) and Varieties of coffee beans (V).

(b) In the long run, when can she vary all three inputs?

(c) Now suppose the manager of The Wandering Goat opens a second storefront. The marginal cost of producing lattes at these two stores, A and B, are different because the new storefront B is not as productive.

MCa = 8Qa

MCb = 10Qb

What is the most cost-effective way for the manager to produce 180 lattes (Qa+Qb=180?)