If Kim and Pat from exercise 5.14 merge their operations, they would need only one receptionist, and their rent for the joint office would be $2,800 per month. All other values stay the same. Calculate the average and incremental cost per case for the merged office. Do they have economies of scale at 100 accounts per month? Should Kim and Pat merge their offices?

Exercise 5.14

Kim and Pat underwrite insurance. Each underwrites 50 accounts per month. Each account takes four hours to underwrite. The value of their time is $40 per hour. Monthly costs for each are $1,500 for an office, $2,000 for a receptionist, and $2,400 for a secretary. Calculate the average and incremental cost per case for Kim and Pat.