The Bountiful Bakery is considering hiring another pastry chef.The bakery knows the average product of its chefs currently is 15 dozen croissants per day.It also believes that the next chef hired will produce an extra 12 dozen croissants per day.A dozen croissants sell for $30.The bakery should hire another worker:
A)only if the new chef's marginal product is 12 dozen or more.
B)only if the new chef's daily wage is $450 or less.
C)only if the new chef's daily wage is $360 or less.
D)because the marginal product is below the average product.

Question

Quizplus · Accepted Answer

The bakery should hire another worker only if his contribution to the total output is equal to or greater than his wage cost. This can be determined by calculating the marginal product of the new worker and comparing it to his wage cost, as follows:

Marginal product = additional dozens of croissants produced by the new worker = 12
Wage cost = daily wage of the new worker

To determine the maximum daily wage that the bakery should pay the new worker, we need to compare the extra revenue generated by his additional output to his wage cost. Since the price per dozen croissants is $30, the extra revenue generated by the new worker's output is:

Extra revenue = marginal product * price = 12 * $30 = $360

Therefore, the bakery should hire the new worker only if his daily wage is $360 or less (i.e., his wage cost does not exceed his marginal revenue product). Hence, the correct answer is (C).

The Bountiful Bakery Is Considering Hiring Another Pastry Chef