Linda's Autoplex performs oil changes on automobiles,light trucks,and sport utility vehicles.She is a profit-maximizing business owner whose firm operates in a competitive market.The marginal cost of an oil change is $20.The marginal productivity of the last worker that Linda hired was 1.5 oil changes per hour.What is the maximum hourly wage that Linda was willing to pay the last worker hired?

Question

Quizplus · Accepted Answer

The maximum hourly wage Linda is willing to pay is equal to the marginal revenue product of labor, which is the marginal productivity of labor (1.5 oil changes per hour) multiplied by the marginal cost of an oil change ($20). Thus, 1.5 * $20 = $30.

Linda's Autoplex Performs Oil Changes on Automobiles,light Trucks,and Sport Utility