Victoria's Vineyard is considering hiring more sommeliers. The market wage for a sommelier is $120 per day. The average sommelier approves 40 bottles of wine per day, but Victoria expects the next sommelier to produce only 20 bottles per day. Assuming the market for wine is perfectly competitive, Victoria's Vineyard will hire another sommelier if:

Question

Quizplus · Accepted Answer

Victoria's Vineyard will hire another sommelier if the new sommelier will add more value than the market wage, i.e., if the revenue generated by the additional 20 bottles of wine is more than $120. If a bottle of wine sells for $3, the revenue generated by 20 bottles of wine is only $60, which is less than the market wage of $120. If the new sommelier can produce 40 bottles, the revenue generated is $120, which is equal to the market wage, and hence Victoria's Vineyard will not hire another sommelier. If a bottle of wine sells for $2, the revenue generated by 20 bottles of wine is only $40, which is even less than the market wage of $120. Therefore, the best choice is D, where the bottle of wine sells for $6 or more, generating a revenue of $120 or more for the additional 20 bottles, which is higher than the market wage of $120.

Victoria's Vineyard Is Considering Hiring More Sommeliers