Kelly is an architect,and she is trying to decide whether to hire Mike,a draftsman,to assist with her work.Kelly could hire Mike at $20 per hour,but it would take him three times as long to complete a task as it takes Kelly.Kelly is able to earn $90 per hour and has more architectural jobs than she is able to handle.Which of the following is true?
A) Kelly should not hire Mike because it would be faster for her to do the work herself.
B) Kelly should do the drafting work herself because she has the lower opportunity cost.
C) Kelly should hire Mike at the $20 per hour wage rate.
D) Kelly should hire Mike, but only if he is paid more than $30 per hour.
E) Kelly should hire someone who earns minimum wage instead of Mike.

Question

Quizplus · Accepted Answer

Kelly's opportunity cost of doing drafting work is $90 per hour. Since Mike takes three times longer, his opportunity cost is $60 per hour ($20 x 3). Therefore, it is more cost-effective for Kelly to hire Mike at $20 per hour to do the drafting work. This allows Kelly to focus on higher-paying architectural work, increasing her overall productivity and profitability.

Kelly Is an Architect,and She Is Trying to Decide Whether