Manny Motors, Inc., can hire auto workers for $20 per hour, whereas robot arms cost $12 per hour to operate. Giving up one hour of labor makes it possible for Manny Motors to afford
A) 4 fewer robot hours
B) 3/5 more robot hours
C) 1-2/3 more robot hours
D) 3 million more robot hours
E) 5 million more robot hours

Question

Quizplus · Accepted Answer

The opportunity cost of one hour of labor is ($20) - ($12) = $8. This means that for every hour of labor given up, Manny Motors can afford to operate $8 worth of robot arms. To find out how many more robot hours can be operated, we divide the cost of one robot hour by the opportunity cost of labor:

$12 / $8 = 1.5

So for every hour of labor given up, Manny Motors can afford to operate 1.5 more robot hours. Therefore, giving up one hour of labor makes it possible for Manny Motors to afford 1-2/3 more robot hours, which is choice C.