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 $800 per day. If she hires another worker, she can make another $600 per day. The marginal benefit of hiring another worker decreases by $200 with each additional hire. Assuming that workers are paid $20 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 two workers and the revenue of the store will be $1,400.
B)She will hire three workers and the revenue of the store will be $1,800.
C)She will hire four workers and the revenue of the store will be $2,000.
D)She will hire five workers and the revenue of the store will be $2,000.

Question

Quizplus · Accepted Answer

- Hiring the first worker brings in a revenue of $800 per day.
- Hiring the second worker brings in an additional $600 per day, for a total revenue of $1,400 per day.
- Hiring the third worker only adds $400 in revenue ($200 less than the second worker), but the cost of paying the third worker for eight hours is $160 ($20 per hour * 8 hours), so the marginal benefit of hiring the third worker is only $240. 
- The marginal benefit of hiring the fourth worker is only $40 ($200 less than the third worker), but the cost of paying the fourth worker for eight hours is again $160. So, it would not make sense to hire four workers.
- Therefore, the optimal number of workers to hire is three, which leads to a total revenue of $2,000 per day ($800 + $600 + $600).

Marie Johnston Is a Manager at an Electronics Store and Has