Marie Johnston is a manager at an electronics store and has to decide how many workers to hire. If she hires one worker, her revenue is $500 per day. If she hires another worker, she can make another $400 per day. The marginal benefit of hiring another worker decreases by $100 with each additional hire. Assuming that workers are paid $15 per hour and work eight hours, how many employees should Marie hire, and what will be the total revenue of her store?
A)She will hire three workers and the revenue of the store will be $1,200.
B)She will hire four workers and the revenue of the store will be $1,400
C)She will hire four workers and the revenue of the store will be $1,400.
D)She will hire six workers and the revenue of the store will be $1,500

Question

Quizplus · Accepted Answer

Marie should continue hiring workers as long as the marginal benefit (additional revenue) of hiring another worker is greater than or equal to the marginal cost (wage) of hiring that worker. The wage for each worker for a day is $15/hour * 8 hours = $120. The revenue from each worker decreases by $100 for each additional worker: $500, $400, $300, $200. Hiring a fifth worker would add $100 in revenue, which equals the cost, so she should hire four workers. The total revenue with four workers is $500 + $400 + $300 + $200 = $1,400.

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