Question

Which of the following is an example of a constraint?

• Sarah decides not to purchase an additional pair of Ugg boots because she already has two pairs at home.

• Peter's Place can serve 300 people in its banquet room, and often has to turn away large parties.

• A SouthCoast Clothing decides that five machines and 15 workers is the most efficient in production.

• Harbor Sweets will produce to the point where marginal revenue is equal to marginal cost.

Answer 1

Sarah decides not to purchase an additional pair of Ugg boots because she already has two pairs at home. She has not been constrained by anything and it is a voluntary choice that she has made. Hence , this is not an example of a constraint.

A Southcoast clothing decides that five machines and 15 workers is the most efficient in production. This is also not an example of a constant because firm decides that in order to be efficient only this much amount of workers and machines are to be employed and firm was not Constrained to hire more workers and machines. Firm voluntarily chose that Quantity of labour and machines.

Harbor sweets will produce to the point where marginal revenue is equal to marginal cost is also not a constraint because it may happen that the firm may be able to bear higher marginal cost but with positive profit because it has larger budget but instead chose to produce at this quantity to maximise profit. Hence, this is also not an example of a constraint.

Peter's place can serve 300 people in its banquet room and often has to turn away large parties. There is a constraint on Peter posed by the smaller space due to which he has to involuntary turn away large parties. Had he not faced any problem in renting bigger space, he would have rented it and would never turn away large parties. This is an example of a constraint.

Hence, second option is correct.