Capacity Expansion at Starbucks

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Economics

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Homework # 7. Submit your answers on a one page, printed document, submitted in class. Format: Single space, twelve point font, one inch margins. Your full name and UB person id should be on the top of the page. Use the entire page. No handwritten homework’s. Late homework’s shall not be accepted. Assignment: Page 264 & 265 of Parkin’s 12th Edition of Microeconomics discusses capacity expansion at Starbucks. Discuss: 1) Explain how Starbucks total fixed and variable costs will change. 2) Explain how Starbucks average fixed and variable costs will change. 3) Is bigger always better? Make sure that you: 1) Introduce your topic. 2) Answer the questions. 3) Conclude and summarize your thought(s) on the subject.
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Running Head: CAPACITY EXPANSION AT STARBUCKS

Capacity Expansion at Starbucks
Name
Institution
30/10/2017

1

CAPACITY EXPANSION AT STARBUCKS
Introduction
Businesses such as Starbucks are very interested in controlling costs, increasing their
revenues and increasing their overall profit. The efficiency of any company to achieve all this
is dependent on its size and its production efficiency. The decision by Starbucks California to
expand affects it production efficiency through the changes in its costs variables. The growth
of a company affects the average costs and increases its competitiveness in the market
(Wessels, 2000).
Question 1
There is no expected change in the level of total fixed costs when the company
expands. This is because these fixed costs are not at all related to the quantity of the good
produced. The need for Starbucks to increase the level of productions to more than one
thousand coffee is not going to influence ...


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