Question

The owner and manager of a duplicating service near a major university, is contemplating keeping his shop open in the evening until midnight. In order to do so, he would have to hire additional workers. He estimates that the additional workers would generate the following total output (where each unit of output refers to 100 pages duplicated). If the price of each worker hired must be paid $95 and the price of each unit of output duplicated is $6, how many workers should he hire? (10 points)
Workers Hired 0 1 2 3 4 5 6

Total Product 0 21 40 59 75 85 92

To work this problem you will need to compare MRP to MRC

Answer 1

Answer:

I would hire 4 workers

Explanation:

Marginal cost is $95 for each case

Now we cale to solve for marginal revenue

1st employee:

(21 - 0) x 6 = 126

2nd employee

(40 - 21) x 6 = 114

3rd employee

(59 - 40) x 6 = 114

4th employee

(75 - 59) x 6 = $96

5th employee

(85 - 75) x 6 = 60

As after the fourth employee the amount of additional duplicated is lower than the employee wages it will not hire more.