Tucker Corporation sells its product for $5.00. Tucker's industrial engineers have informed management that hiring one additional worker will increase output by five units per hour. Tucker should hire the additional worker only if the wage rate is:

Question

Quizplus · Accepted Answer

To decide whether or not to hire an additional worker, Tucker Corporation needs to consider the additional cost of wages versus the additional revenue generated by increased output.

Hiring one additional worker increases output by 5 units per hour, which is equivalent to $25.00 of additional revenue (5 units x $5.00 selling price).

If the wage rate is less than $25.00 per hour, hiring the additional worker would result in a net increase in profit. However, if the wage rate is more than $25.00 per hour, the additional cost of wages would exceed the additional revenue generated by increased output, resulting in a net decrease in profit.

Therefore, Tucker should hire the additional worker only if the wage rate is $25.00 or less per hour. Choice C is the best choice.

Tucker Corporation Sells Its Product for $5