566 Miller Economics Today, Nineteenth Edition
Chapter 22 The Firm: Cost and Output Determination
Filling a Truck Is Less Productive Than Sending It Half-Full
For years, managers at Procter & Gamble, the consumer products family, told warehouse workers to pack
a truck full of detergent and send it out to make deliveries to retailers, then pack the next truck with
toothpaste, and so on. Then in the early 2000s, the company invested in inventory-tracking software that
allowed managers to determine how many workers and how much time were required to get products to
their ultimate destinations. What they discovered at first seemed counterintuitive. Sending out trucks fully
loaded with a single product required the use of more inputs per unit of time than shipping a mix of
products on trucks that were less full.
Internet Package Tracking Cuts Marginal Cost at FedEx
At FedEx, the marginal cost incurred in delivering packages speedily often encompasses more than just
the expense of physically transporting a package from one location to another. The additional cost of
delivering one more package also involves the cost of providing information to senders or recipients
checking on the status of the package. Before most people had access to the Internet, FedEx provided
tracking services only by telephone. Hundreds of thousands of customers would call each day and give
Europeans Use More Capital
Since 1970, the nations of the European Union (EU) have increased their total annual output of goods and
Lecture Extender Examples 567
Chinese Enterprises Reduce Their Scale And Average Costs
In the 1980s, many firms in China were government-sponsored enterprises that were either owned by the
government or received large government subsidies. Since the 1990s, the Chinese government has been
selling off many of the companies that it owned and has been reducing the subsidies previously granted
Microsoft Confronts the Law of Diminishing Marginal Returns
operating system. Many businesses also rely on another Microsoft desktop software package called
that includes Word, Excel, and Access, and starting with Office 2000,
Internet-friendly features. Office promises speech-recognition software in the future that may make some
keyboard and mouse features redundant. In spite of these features, Microsoft has had to work harder at
Put Away the Clay and Turn On the Holographic Camera
Traditionally, manufacturers have relied on clay models to create three-dimensional images of what
products on the drawing board might look like once they were constructed. Increasingly, however,
manufacturers are making use of holograms or three-dimensional photographs. A typical holographic model
568 Miller Economics Today, Nineteenth Edition
Economies of Scale in Payments Processing
Automated Clearing Houses (ACHs) process both private payments, such as automatic deposits to wage-
earners bank accounts, and public payments, such as direct deposits of Social Security stipends. The 12