Mary is considering hiring another worker in an assembly line for stereo speakers.Mary knows the average product of labor is 15 speakers per day.She also believes that the next worker hired will produce an extra 12 speakers per day.A speaker sells for $10.Mary should hire another worker:
A)only if the new worker's marginal product is 12 or more.
B)only if the new worker's daily wage is $150 or less.
C)only if the new worker's daily wage is $120 or less.
D)since the marginal product is below the average product.

Question

Quizplus · Accepted Answer

To determine whether Mary should hire another worker, we need to compare the worker's marginal revenue product (MRP) to their wage. MRP is calculated as the additional revenue generated by the additional worker. In this case, the MRP is simply the increase in the number of speakers produced per day, which is 12.

If the new worker's daily wage is greater than their MRP, then it would not be profitable to hire them. However, if the new worker's daily wage is less than or equal to their MRP, then it would be profitable to hire them.

The revenue generated by one speaker is $10. So, the MRP of the new worker can be calculated as follows:

MRP = 12 speakers/day x $10/speaker = $120/day

Since Mary should only hire the new worker if their daily wage is less than or equal to their MRP, she should hire another worker only if the new worker's daily wage is $120 or less. Therefore, the best choice is C.

Mary Is Considering Hiring Another Worker in an Assembly Line