Barry's Brewpub is considering hiring more brewmasters.The market wage for a brewmaster is $120 per day.The average brewmaster produces 40 pints of beer per day,but Barry expects the next brewmaster to produce only 20 pints per day.Assuming the market for beer is perfectly competitive,Barry's Brewpub will hire another brewmaster only if:
A)a pint of brew sells for $3.
B)the new brewmaster can produce 40 pints.
C)a pint of brew sells for $2.
D)a pint of brew sells for $6 or more.

Question

Quizplus · Accepted Answer

To hire another brewmaster, Barry's Brewpub must ensure that the additional cost of hiring the brewmaster is less than the additional revenue generated from the increased production. The additional cost of hiring the brewmaster is the wage of $120 per day. The additional revenue generated will be the number of extra pints produced multiplied by the price per pint. Since the average brewmaster produces 40 pints per day and the new hire is expected to only produce 20 pints per day, the additional revenue generated by the new hire will be:

20 pints/day × price per pint

To cover the additional cost of $120 per day, this revenue must be at least $120. Solving for the minimum price per pint:

20 pints/day × price per pint = $120
Price per pint = $6

Therefore, Barry's Brewpub will hire another brewmaster only if a pint of brew sells for $6 or more. Therefore, option D is the correct answer.

Barry's Brewpub Is Considering Hiring More Brewmasters