Jeff owns a small business installing home security systems priced at $1,000 each. By himself, he can install four systems per month. If he hires an assistant, a total of ten systems can be installed. If he hires two assistants, a total of fifteen systems can be installed. Assuming that the price stays the same, what is the marginal revenue product of the first assistant and the marginal revenue product of the second assistant?

Question

Quizplus · Accepted Answer

The marginal revenue product (MRP) of the first assistant is the additional revenue generated from hiring the first assistant, which is the difference between the revenue generated by installing ten systems and the revenue from installing four systems by Jeff alone. This is (10 - 4) * $1,000 = $6,000. The MRP of the second assistant is the additional revenue from going from ten to fifteen systems, which is (15 - 10) * $1,000 = $5,000.

Jeff Owns a Small Business Installing Home Security Systems Priced