Question

A firm pays Pam $40 per hour to assemble personal computers. Each day, Pam can assemble 4 computers if she works 1 hour, 7 computers if she works 2 hours, 9 computers if she works 3 hours, and 10 computers if she works 4 hours. Pam cannot work more than 4 hours day. Each computer consists of a motherboard, a hard drive, a case, a monitor, a keyboard, and a mouse. The total cost of these parts is $600 per computer. If the firm sells each computer for $650, then how many hours a day should the firm employ Pam to maximize its net benefit from her employment?

Answer 1

Answer:

4 hours

Explanation:

The profit margin, in dollars, from selling each computer, excluding Pam's pay, is $50.

Since Pam's rate is $40 per hour, for each of the four scenarios presented, the company's net benefit is:

$B_{1h}=\ 50*4 - \ 40*1 = \ 160\\B_{2h}=\ 50*7 - \ 40*2 = \ 270\\B_{3h}=\ 50*9 - \ 40*3 = \ 330\\B_{4h}=\ 50*10 - \ 40*4 = \ 340$

Therefore, in order to maximize its net benefit from her employment, the company should employ Pam for fours hours a day.