Look up the definition of economies of scale. How does this definition apply to Subway and Mark & Mindy? Economies of scale allows one to purchase ingredients on such a large scale that the price per unit is cheaper than someone who buys a smaller quantity. Subway has the advantage of economies of scale in this situation since they are able to buy tons of ingredients at a very low price compared to the small quantities and hence higher price Mark & Mindy have to pay at the grocery store. What are the assumptions made in this case? Sandwiches don’t get boring to eat day in and day out No coupons/promotions are used. The more promotions used the answers change question 4. Bags & napkins are free- Mark & Mindy did not account for the cost of plastic bags & napkins for their sandwiches Sales tax is 6% Are there any other solutions to their problem that have not been explored? Suggestions to save them time, money, etc? Purchasing one foot long and splitting it Subway Online Ordering Purchasing other readymade foods from the grocery store Six Inch Pricing Price per Grocery Store Grocery Store Cold Cut Sub Ingredients Quantity Price (serving size) 9oz tub =approx 18 Ham (2 slices) $ 2.79 $ 0.31 slices Salami (2 slices) 8oz = 44 slices $ 4.49 $ 0.20 Bologna (1 slice) 16 slices $ 2.79 $ 0.17 Swiss Cheese (1 slice) 10 slices $ 2.99 $ 0.30 5 total-half a plum Tomatoes (3 slices) $ 2.95 $ 0.30 tomato per sandwich 1 head iceberg- 10th Lettuce (6” piece) of a head per $ 1.79 $ 0.18 sandwich 1 jar = approx 56 Banana Peppers (5 ct) $ 2.99 $ 0.27 slices
Look up the definition of economies of scale. How does this definition apply to Subway and Mark & Mindy? Economies of scale allows one to purchase ingredients on such a large scale that the price per unit is cheaper than someone who buys a smaller quantity. Subway has the advantage of economies of scale in this situation since they are able to buy tons of ingredients at a very low price compared to the small quantities and hence higher price Mark & Mindy have to pay at the grocery store. What are the assumptions made in this case? Sandwiches don’t get boring to eat day in and day out No coupons/promotions are used. The more promotions used the answers change question 4. Bags & napkins are free- Mark & Mindy did not account for the cost of plastic bags & napkins for their sandwiches Sales tax is 6% Are there any other solutions to their problem that have not been explored? Suggestions to save them time, money, etc? Purchasing one foot long and splitting it Subway Online Ordering Purchasing other readymade foods from the grocery store Six Inch Pricing Cold Cut Sub Ingredients Grocery Store Quantity Grocery Store Price Price per (serving size) Ham (2 slices) 9oz tub =approx 18 slices $ 2.79 $ 0.31 Salami (2 slices) 8oz = 44 slices $ 4.49 $ 0.20 Bologna (1 slice) 16 slices $ 2.79 $ 0.17 Swiss Cheese (1 slice) 10 slices $ 2.99 $ 0.30 Tomatoes (3 slices) 5 total-half a plum tomato per sandwich $ 2.95 $ 0.30 Lettuce (6” piece) 1 head iceberg- 10th of a head per sandwich $ 1.79 $ 0.18 Banana Peppers (5 ct) 1 jar = approx 56 slices $ 2.99 $ 0.27
Subway-Economics-Answer-Key.docx