Jay and Claire partner up with a local design company to expand their operations. Pritchett’s closet has a lot of space to manufacture, but the design company has new ideas that are revolutionizing the closet industry. They believe this merger is mutually beneficial given each others’ strengths and weaknesses.
It turns out that the design company spends a lot of time on non-pecuniary benefits for its employees to make the company a “cool” place to work, but they lose a lot of money. Jay wants to go back to a more traditional workplace that focuses on production and not fun. The concept of efficiency wages means that firms pay above equilibrium wages in order to motivate and incentivize workers to perform better. Jay doesn’t agree with this management style, and we learn later that the design company wanted to merge because they needed more discipline in their finances.
See More: comparative advantage, compensation, costs, efficiency wages, labor, mergers, nonpecuniary benefits, production, worklife balance
Claire and Jay are visiting a competitor’s business. The competitor wants to buy Pritchett Closets, but Claire and Jay have a different idea. The new company is focused on creating smart closets that can pick outfits for the person based on the weather and their current size. They have great technology, but they don’t have the manufacturing capabilities to fulfill all their orders. Pritchett Closets, on the other hand, has the manufacturing space, but they haven’t invested much in technology. Claire proposes that they merge instead.
See more: acquisitions, industrial organization, mergers, proprietary technological knowledge, technological change, technological knowledge, technology
Pam’s ex-boyfriend is back in town and wants to get back together. Mitchel is all in favor of the reconciliation, but Cam is against it. Why is Mitchell so eager for her to move out? As long as Cam’s sister is in the apartment upstairs, they aren’t able to rent the apartment out and earn extra money. While Cam is trying to be generous for his family, Mitchell sees the missing dollar signs.
See more: altruism, cost of capital, implicit cost, opportunity cost, personal finance, rental income, tradeoffs
Phil and Jay operate a parking lot together and hired a talkative woman to operate the booth (thanks to a coin flip!). Her chattiness causes a car behind Jay to drive away, which means the two don’t earn $8 from that one additional car. This simple clip is a good introduction to the concept of marginal revenue in that each car to the parking lot represents “another $8” to the firm.
See more: marginal analysis, marginal profit, marginal revenue