Lesson Topics: B.8 Waiting Line Economic Analysis Review Questions

B.
8 Waiting Line Economic Analysis Review Questions
Lesson Topics
Analytical Formulas for Multiple Channels
for operating characteristics have been derived, under
the queue discipline first-come, first-served, for
several queuing models with multiple channels.
M/M/2 Queuing System designates M = Markov

(memoryless) arrival distribution (Poisson), M =
Markov service-time distribution (exponential), and 2
service channels, under first-come, first-served.
Economic Analysis (6) of waiting lines maximizes

profit for a firm by maximizing value for customers.
Maximizing customer value trades off quick service
with low purchase prices (resulting from lower costs).
Economic Analysis with Teamwork (7)

maximizes firm’s profits and customer’s value by
trading off having more service channels with teams
providing faster service in each channel.
1
B.8 Waiting Line Economic Analysis Review Questions
Economic Analysis
Question. Two new checkout scanning systems are
under consideration Target. Arrivals to the checkout
stand follow the Poisson distribution with  = 2 per
minute. The cost for waiting is $18 per hour. The first
system has an exponential service rate of 5 per minute and costs $10 per
hour to operate. The second system has an exponential service rate of 8
per minute and costs $20 per hour to operate. Which system should be
chosen?
You can use the Management Scientist to compute your answer, but do not
use the Economic Analysis check box. You should explain your answer.
2
Answer to Question:
The cost for waiting is $18 per hour, or $18/60 = $0.30 per minute.
First system, k = 1 channel,  = 2 per minute,  = 5 per minute.

Management Scientist reports .6667 average number of units in the
system. Therefore, the cost per minute is .3x.6667 + 10/60 = .3667.
Second system, k = 1 channel,  = 2 per minute,  = 8 per minute.

system. Therefore, the cost per minute is .3x.3333 + 20/60 = .4333.
Choose first system.
3
Economic Analysis
Question. Two alternative checkout scanning
systems are under consideration by a retail store.
Arrivals to the checkout stand follow the Poisson
distribution with an average of one customer arriving
every 30 minutes. The cost for waiting is $100 per hour. The first system
costs $10 per hour to operate, and it has an exponential service rate, and it
can serve an average of one customer every 15 minutes. The second
system costs $20 per hour to operate, and it has an exponential service
rate, and it can serve an average of one customer every 10 minutes.
Which system should be chosen?
You may use any or all of the following analytical formulas for an M/M/1
system to compute your answer:
The probability of no units in the system: P0 = 1-
The average number of units in the waiting line: Lq = 
The average number of units in the system: L = Lq + 
The average time a unit spends in the waiting line: Wq = Lq/
The average time a unit spends in the system: W = 1/
The probability that an arriving unit has to wait: Pw = 
Probability of n units in the system: Pn = ()nP0
4
Answer to Question:
First system: k = 1 channel,  = 2 per hour, and  = 4 per hour.
The average number of units in the waiting line:
Lq =  = 4/(4(2)) = 1/2
The average number of units in the system: L = Lq +  = ½ + 2/4 = 1
Cost to operate = $10 + $100*L = $110 per hour, which is $1.83 per
minute.
Second system: k = 1 channel,  = 2 per hour, and  = 6 per hour.

Lq =  = 4/(6(4)) = 1/6
The average number of units in the system: L = Lq +  = 1/6 + 2/6 = .5
Cost to operate = $20 + $100*L = $70 per hour, which is $1.17 per minute.
So, choose the second system.
5
Economic Analysis
Question. Pepperdine University is considering
whether it should employ two, three, or four
attendants at the One Stop student services windows.
To decide, Pepperdine hires management scientists
to make four measurements. 1) After assuming that arrivals to the
checkout stand follow the Poisson distribution, the scientists measure that
an average of one customer arrives every 30 seconds. 2) After assuming
that service times at the checkout stand follow the exponential distribution,
the scientists measure that it takes an average of 40 seconds to serve each
customer. 3) The scientists ask school administrators and find out each
cashier costs $30 per hour to employ. Finally, considering that median
income for a family in Malibu is $123,293, the scientists figure the cost of
customer waiting is $22 per hour. How many attendants should
Pepperdine employ? (Two? Three? Four?)
Is it possible to employ just one attendant?
How would the optimal number of attendants change for Cal State Chico,
which has all the same numbers above, except considering that median
income for a family in Chico is $43,077, the scientists figure the cost of
customer waiting is only $5 per hour.
6
Answer to Question: An average of one customer arrives every 30

seconds means  = 120 customers arriving per hour. An average of 40
seconds to serve each customer means  = 90 customers served per hour.
Employing one cashier means the waiting line will grow without limit, so
that is not optimal.
Employing two attendants means the average number of customers in the

system is 2.4, which means the hourly cost is 2x$30 + 2.4x$22 = $112.8.
Employing three attendants means the average number of customers in the

system is 1.478, which means the hourly cost is 3x$30 + 1.478x$22 =
$122.52.
Employing four attendants means the average number of customers in the

system is 1.3592, which means the hourly cost is 4x$30 + 1.3592x$22 =
$149.90.
Hence, Pepperdine University should employ two attendants, to achieve

the minimum hourly cost of $112.80.
Cal State Chico faces hourly costs of 2x$30 + 2.4x$5 = $72 for two
attendants, 3x$30 + 1.478x$5 = $97.39 for three attendants, and 4x$30 +
1.3592x$5 = $126.80 for four attendants.
Hence, Cal State Chico should also employ two attendants, to achieve the
minimum hourly cost of $52.
7
Economic Analysis
Question. A Florida coastal community experiences
a population increase during the winter, with seasonal
residents arriving from nothern states and Canada.
Staffing at a local post office is often in a state of
change due to the relatively low volumne of customers in the summer.
Consider a typical winter month. Assume Poisson arrival times and

exponential service times. Customers arrive at a rate of 55 per hour. The
average service time is 1 minute per customer. Customer waiting time is
valued at $20 per hour. From that data, determine the recommended
number of tellers at the post office, if each teller costs $20 per hour in
wages and benefits.
Now, consider a typical summer month. Assume Poisson arrival times and
exponential service times. Customers arrive at a rate of 24 per hour. The
average service time is 1 minute per customer. Customer waiting time is
valued at $20 per hour. From that data, determine the recommended
number of tellers at the post office, if each teller costs $20 per hour in
wages and benefits.
For both answers, you may use computer software to compute your
answer, but be sure to define the computer input and explain how the
computer output solves the problem. Do not use the Economic Analysis
checkbox in the Management Scientist.
8
Answer to Question: The cost of waiting is $20 per hour, and the cost of
each channel (teller) is $20.
First, consider a typical winter month:  = 55 per hour arrive,  = 60 per
hour served.
For k = 1 channel, Management Scientist reports 11 average number of

units in the system. Therefore, total hourly cost is $20x11 + 20 = $240.
For k = 2 channels, Management Scientist reports 1.16 average number of

units in the system. Therefore, total hourly cost is $20x1.16 + 40 = $63.20.
For k = 3 channels, Management Scientist reports 0.9489 average number

of units in the system. Therefore, total hourly cost is $20x0.9489+ 60 =
$78.98.
And for k > 4 channels, the channel cost alone is at least $80.
Choose 2 channels (that is, 2 tellers).
Finally, consider a typical summer:  = 24 per hour arrive,  = 60 per hour

served.
For k = 1 channel, Management Scientist reports 0.6667 average number

of units in the system. Therefore, total hourly cost is $20x0.6667 + 20 =
$33.3333.
And for k > 2 channels, the channel cost alone is at least $40.
Choose 1 channel (that is, 1 teller).
9
Economic Analysis
Question. Hinck Electrical Contractor, Inc. is
considering opening a second service counter to
better serve the electrical contractor customers. The
arrival rate is 10 per hour. The service rate is 14 per
hour. Assume Poisson arrival and exponential service-time distributions. If
the cost of waiting is $30 and the cost of each service counter is $22 per
hour, then should the second counter be opened?
10
Answer to Question:
One counter, k = 1 channel,  = 10 per hour,  = 14 per hour.
Management Scientist reports 2.5 average number of units in the system.
Therefore, the cost per hour 30x2.5 + 22 = 97.
Two counters, k = 2 channels,  = 10 per hour,  = 14 per hour.

system. Therefore, the cost per hour 30x.8187 + 44 = 68.561.
Open the second counter.
11
Economic Analysis with Teamwork

Question. Food on Foot is a 501(c)(3) nonprofit
organization dedicated to providing the poor and
homeless of Los Angeles with nutritious meals,
clothing, and assistance in the transition to
employment and life off the streets. Food on Foot operates a weekly meal
program every Sunday in Hollywood. They are considering two alternative
distribution systems.
Arrivals to the distribution stand follow the Poisson distribution with an

average of one homeless person arriving every 4 minutes. The cost for a
homeless person waiting is $1 per hour.
The first system involves one volunteer and costs $10 per hour to operate
(the opportunity cost of the volunteer’s time), and it has an exponential
service rate, and it can serve an average of one homeless person every 2
minutes.
The second system involves two volunteers working as a team (one talks to
the homeless and the other serves the meals) and costs $20 per hour to
operate (the opportunity cost of the 2 volunteer’s time), and it has an
exponential service rate, and it can serve an average of one homeless
person every 1 minute.
12
Answer to Question:
Lq =  = 15*15/(30(15)) = 1/2
The average number of units in the system: L = Lq +  = ½ + 15/30 = 1
Cost to operate = $10 + $1*L = $11 per hour.

Lq =  = 15*15/(60(45)) = 1/(4*3) = 1/12
The average number of units in the system: L = Lq +  = 1/12 + 15/60 =
4/12 = .33
Cost to operate = $20 + $1*L = $20.33.
Choose the first system. (Going beyond the basic answer, ask one of your
two volunteers to put in extra time at work and donate their income. The
homeless people will benefit more from the extra money than from the
faster service.)
13

Question. Food on Foot is a 501(c)(3) nonprofit
organization dedicated to providing the poor and
homeless of Los Angeles with nutritious meals,
clothing, and assistance in the transition to
employment and life off the streets. Food on Foot operates a weekly meal
program every Sunday in Hollywood. They are considering three
alternative distribution systems.
Arrivals to the distribution stand follow the Poisson distribution with an

average of one homeless person arriving every 6 minutes. The cost for a
homeless person waiting is $3 per hour.
The first system involves one volunteer (who talks to the homeless and
serves food and serves drinks) and costs $1 per hour to operate (the
opportunity cost of the volunteer’s time), and it has an exponential service
rate, and it can serve an average of one homeless person every 3 minutes.
the homeless and serves food, and the other serves drinks) and costs $2
per hour to operate (the opportunity cost of the 2 volunteer’s time), and it
has an exponential service rate, and it can serve an average of one
homeless person every 2 minutes.
The third system involves three volunteers working as a team (one talks to
the homeless, one serves food, and the third serves drinks) and costs $3
homeless person every 1.5 minutes.
14

15
Answer to Question:
Lq =  = 10*10/(20(10)) = 1/2
The average number of units in the system: L = Lq +  = 1/2 + 1/2 = 1

Lq =  = 10*10/(30(20)) = 1/6
The average number of units in the system: L = Lq +  = 1/6 + 1/3 = 1/2 =
0.50
Cost to operate = $2 + $3*L = $3.50 per hour.
Third system: k = 1 channel,  = 10 per hour, and  = 40 per hour.

Lq =  = 10*10/(40(30)) = 1/12
The average number of units in the system: L = Lq +  = 1/12 + 1/4 = 1/3
= 0.33
Choose the second system. (Going beyond the basic answer, ask any
other volunteers beyond two to put in extra time at work and donate their
income. The homeless people will benefit more from the extra money than
from the faster service.)
16

Question. Food on Foot operates a weekly meal
program every Sunday in Hollywood. They are
considering three alternative distribution systems.
Arrivals to the distribution stand follow the Poisson

distribution with an average of one homeless person arriving every 12
minutes. The cost for a homeless person waiting is $2 per hour.
The first system involves one volunteer (who talks to the homeless and
serves food and serves drinks) and costs $10 per hour to operate (the
opportunity cost of the volunteer’s time), and it has an exponential service
rate, and it can serve an average of one homeless person every 6 minutes.
the homeless and serves food, and the other serves drinks) and costs $20
homeless person every 3 minutes.
The third system involves three volunteers working as a team (one talks to
the homeless, one serves food, and the third serves drinks) and costs $30
homeless person every 1 minute.
Which system should be chosen? Re-compute your answer if the

customers value their time at $20 per hour, rather than $2 per hour.
17
Answer to Question:
Lq =  = 5*5/(10(5)) = 1/2
The average number of units in the system: L = Lq +  = 1/2 + 1/2 = 1

Lq =  = 5*5/(20(15)) = 1/12
The average number of units in the system: L = Lq +  = 1/12 + 1/4 = 1/3
= 0.3333
Third system: k = 1 channel,  = 5 per hour, and  = 60 per hour.

Lq =  = 5*5/(60(55)) = 1/132
The average number of units in the system: L = Lq +  = 1/132 + 1/12 =
0.0909
Choose the first system. (Going beyond the basic answer, ask any other
volunteers beyond two to put in extra time at work and donate their income.
The homeless people will benefit more from the extra money than from the
faster service.)
At $20 per hour for customers,

First system cost to operate = $10 + $20*(1) = $30 per hour.
Second system cost to operate = $20 + $20*(0.333) = $26.66 per hour.
Third system cost to operate = $30 + $20*(0.090) = $31.80 per hour.
Choose the second system.
18

Question. Pepperdine University student volunteers
are considering how to best serve food to the
homeless. To decide, Pepperdine hires management
scientists to make four measurements. 1) After
assuming that arrivals of homeless people follow the Poisson distribution,
the scientists measure that an average of one homeless person arrives
every 2 minutes. 2) The scientists ask social workers and find out each
homeless person values their time at $2 per hour. 3) After polling the
student volunteers, the scientists find out each volunteer values their
volunteer time at $10 per hour. (That is, each volunteer would be
indifferent between donating either 1 hour of their time or $10.) Finally, the
scientists consider 5 alternative methods for serving food:
Method A: There is one line, and 4 volunteers work along the line. It takes
30 seconds on average to serve a homeless person under this method.
Method B: There is one line, and 8 volunteers work along the line. It takes
Method C: There are 2 lines, and 4 volunteers work along each line. For
each line, it takes 30 seconds on average to serve a homeless person
under this method.
Method D: There are 4 lines, and 2 volunteers work along each line. For
under this method.
Method E: There is 1 line, and 1 volunteer works on the line. It takes 300
seconds on average to serve a homeless person under this method.
Which method is best? In your answer, be sure to show your computations

for each of the 5 methods.
19
You may use computer software to compute your answer, but be sure to
define the computer input and explain how the computer output solves the
problem. Do not use the Economic Analysis checkbox in the Management
Scientist.
20
Answer to Question: The cost of a volunteer is $10 per hour, and the
cost of waiting is $2 per hour.
Method A, V = 4 volunteers, k = 1 channel,  = 30 per hour arrive rate,  =

120 per hour served. Management Scientist reports L = 0.3333 average
number of units in the system. Therefore, the hourly operating cost is
$10x4 + $2x.333 = $40.67.
Method B, V = 8, k = 1,  = 30,  = 240, L = 0.1429. Hourly cost is

$10x8 + $2x.1429 = $80.29.
Method C, V = 8, k = 2,  = 30,  = 120, L = 0.2540. Hourly cost is

$10x8 + $2x.2540 = $80.51.
Method D, V = 8, k = 4,  = 30,  = 60, L = 0.5003. Hourly cost is

$10x8 + $2x.5003 = $81.00.
Method E, V = 1, k = 1,  = 30,  = 12, L = infinity. Hourly cost is infinity.
Choose Method A.
21

under this method.
under this method.

22
Scientist.
23
Answer to Question: The cost of a volunteer is $20 per hour, and the
cost of unit waiting is $1 per hour.

$20x4 + $1x.3333 = $80.33.

$20x8 + $1x.1429 = $160.14.

$20x8 + $1x.2540 = $160.25.

$20x8 + $1x.5003 = $161.50.
Choose Method A.
24

under this method.
under this method.

25
How would your answer change if the volunteers, rather than serving the
homeless, are serving middle managers, who each value their time at $30
per hour.
Scientist.
26
Answer to Question: The cost of a volunteer is $10 per hour.

First, answer when the cost of waiting is $3 per hour.

$15x4 + $3x.2857 = $60.86

$15x8 + $3x.125 = $120.38

$15x8 + $3x.1678 = $120.50

$15x8 + $3x.2500 = $81.75

Choose Method A.
Second, answer when the cost of waiting is $30 per hour.

$15x4 + $30x.2857 = $68.6

$15x8 + $30x.125 = $123.8

$15x8 + $30x.1678 = $125.0
27

$15x8 + $30x.2500 = $88.5
Choose Method A.
28

2 minutes on average to serve a homeless person under this method.
1 minute on average to serve a homeless person under this method.
under this method.
under this method.

29
How would your answer change if the volunteers, rather than serving the
homeless, are serving lawyers, who each value their time at $100 per hour.
Scientist.
30
Answer to Question: The cost of a volunteer is $10 per hour.

First, answer when the cost of waiting is $1 per hour.

$10x4 + $1x1.0000 = $41

$10x8 + $1x.333 = $80.33

$10x8 + $1x.1255 = $80.1255

$10x8 + $1x.1875 = $80.1875
Choose Method A, at $41 per hour.
Second, answer when the cost of waiting is $100 per hour.

$10x4 + $100x1.0000 = $140

$10x8 + $100x.333 = $113.33

$10x8 + $100x.1255 = $92.55
31

$10x8 + $100x.1875 = $98.75

Choose Method C, at $92.55 per hour.
32

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B.

8 Waiting Line Economic Analysis Review Questions

M/M/2 Queuing System designates M = Markov

Economic Analysis (6) of waiting lines maximizes

Economic Analysis with Teamwork (7)

First system, k = 1 channel,  = 2 per minute,  = 5 per minute.

Second system, k = 1 channel,  = 2 per minute,  = 8 per minute.

Which system should be chosen?

Second system: k = 1 channel,  = 2 per hour, and  = 6 per hour.

Is it possible to employ just one attendant?

Answer to Question: An average of one customer arrives every 30

Employing two attendants means the average number of customers in the

Employing three attendants means the average number of customers in the

Employing four attendants means the average number of customers in the

Hence, Pepperdine University should employ two attendants, to achieve

Consider a typical winter month. Assume Poisson arrival times and

For k = 1 channel, Management Scientist reports 11 average number of

For k = 2 channels, Management Scientist reports 1.16 average number of

For k = 3 channels, Management Scientist reports 0.9489 average number

Choose 2 channels (that is, 2 tellers).

Finally, consider a typical summer:  = 24 per hour arrive,  = 60 per hour

For k = 1 channel, Management Scientist reports 0.6667 average number

Two counters, k = 2 channels,  = 10 per hour,  = 14 per hour.

Economic Analysis with Teamwork

Arrivals to the distribution stand follow the Poisson distribution with an

Which system should be chosen?

Second system: k = 1 channel,  = 15 per hour, and  = 60 per hour.

Economic Analysis with Teamwork

Arrivals to the distribution stand follow the Poisson distribution with an

Which system should be chosen?

The average number of units in the system: L = Lq + 

Second system: k = 1 channel,  = 10 per hour, and  = 30 per hour.

Third system: k = 1 channel,  = 10 per hour, and  = 40 per hour.

Economic Analysis with Teamwork

Arrivals to the distribution stand follow the Poisson

Which system should be chosen? Re-compute your answer if the

Second system: k = 1 channel,  = 5 per hour, and  = 20 per hour.

Third system: k = 1 channel,  = 5 per hour, and  = 60 per hour.

At $20 per hour for customers,

Choose the second system.

Economic Analysis with Teamwork

Which method is best? In your answer, be sure to show your computations

Method A, V = 4 volunteers, k = 1 channel,  = 30 per hour arrive rate,  =

Method B, V = 8, k = 1,  = 30,  = 240, L = 0.1429. Hourly cost is

Method C, V = 8, k = 2,  = 30,  = 120, L = 0.2540. Hourly cost is

Method D, V = 8, k = 4,  = 30,  = 60, L = 0.5003. Hourly cost is

Method E, V = 1, k = 1,  = 30,  = 12, L = infinity. Hourly cost is infinity.

Economic Analysis with Teamwork

Which method is best? In your answer, be sure to show your computations

Method A, V = 4 volunteers, k = 1 channel,  = 30 per hour arrive rate,  =

Method B, V = 8, k = 1,  = 30,  = 240, L = 0.1429. Hourly cost is

Method C, V = 8, k = 2,  = 30,  = 120, L = 0.2540. Hourly cost is

Method D, V = 8, k = 4,  = 30,  = 60, L = 0.5003. Hourly cost is

Method E, V = 1, k = 1,  = 30,  = 12, L = infinity. Hourly cost is infinity.

Economic Analysis with Teamwork

Which method is best? In your answer, be sure to show your computations

Answer to Question: The cost of a volunteer is $10 per hour.

Method A, V = 4 volunteers, k = 1 channel,  = 20 per hour arrive rate,  =

Method B, V = 8, k = 1,  = 20,  = 180, L = 0.125. Hourly cost is

Method C, V = 8, k = 2,  = 20,  = 120, L = 0.1678. Hourly cost is

Method D, V = 8, k = 4,  = 20,  = 80, L = 0.2500. Hourly cost is

Method E, V = 1, k = 1,  = 20,  = 10, L = infinity. Hourly cost is infinity.

Second, answer when the cost of waiting is $30 per hour.