Table 17-3

Hotspur Incorporated, a manufacturer of microwave ovens, is a price taker in its input and output markets. The firm hires labor at a constant wage rate of $800 per week and sells microwave ovens at a constant price of $80. Table 17-3 shows the relationship between the quantity of labor it hires and the quantity of microwave ovens it produces. Assume that labor is the only variable input.
-Refer to Table 17-3.What is the amount of revenue added as a result of hiring the fourth worker?

Question

Table 17-3
  
Hotspur Incorporated, a manufacturer of microwave ovens, is a price taker in its input and output markets. The firm hires labor at a constant wage rate of $800 per week and sells microwave ovens at a constant price of $80. Table 17-3 shows the relationship between the quantity of labor it hires and the quantity of microwave ovens it produces. Assume that labor is the only variable input.
-Refer to Table 17-3.What is the amount of revenue added as a result of hiring the fourth worker?

Quizplus · Accepted Answer

To determine the amount of revenue added as a result of hiring the fourth worker, we need to calculate the total output (quantity of microwaves produced) for 4 workers and subtract from it the total output for 3 workers. From the table, we can see that the total output for 4 workers is 320 microwaves (80 microwaves per worker x 4 workers), and the total output for 3 workers is 240 microwaves (80 microwaves per worker x 3 workers). Therefore, the amount of revenue added as a result of hiring the fourth worker is $80 x 80 = $6,400. However, the question asks for the amount of revenue added (not the total revenue), so we need to subtract the revenue generated by 3 workers from the revenue generated by 4 workers: $6,400 - $5,200 = $1,200. Therefore, the answer is A, $1,200.

Table 17-3 Hotspur Incorporated, a Manufacturer of Microwave Ovens, Is a Price