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Chapter 11: Problem 5

Peter Reinhardt, CEO of Segment.com, made the following comment on his blog when discussing how the firm's noisy open office was lowering the productivity of its engineers: "We can't immediately ditch our open floor plan (although we're looking at various options for our next office.)" Why can't the firm immediately ditch its open floor plan? Is Reinhardt's remark about Segment.com's economic short run or its economic long run? Briefly explain.

Short Answer

Expert verified
Segment.com cannot immediately change its open floor plan due to constraints that make the office structure a fixed factor in the short run. Reinhardt's comment therefore pertains to the economic short run, but his mention of exploring options for the next office suggests consideration of long-run economic factors, where all factors of production could be variable.

Step by step solution

01

Identify Factors of Production

Factors of production in this scenario are the office (physical capital) and the engineers (labour). It's mentioned that Segment.com's open floor plan, a feature of the office, is causing productivity loss among its engineers.
02

Understand the Constraints

The CEO's comment implies that they cannot immediately change their open floor plan due to some constraints. These constraints could involve the costs of restructuring the office, disruptions to the work environment, or even the terms of a lease agreement.
03

Evaluate Time Frame

Lastly, we need to evaluate whether Reinhardt's remark refers to the short run or the long run in economic terms. Given that the existing floor plan cannot be immediately modified, the office's physical structure is a fixed factor in the short run. Therefore, this situation falls under the short run in economics.
04

Explain the Evaluation in the Last Step

Reinhardt's comment refers to the short run, during which some factors of production (in this case, the office layout) are fixed. However, his mention of looking into options for their next office suggests that they do have plans to change this factor in the long run, thereby implying that all factors of production could potentially be variable in the long run.

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