Bob's Baubles,Inc.,sells its product for $3 each in a perfectly competitive market.If it increases its workforce from 1,000 to 1,001,its output goes from 615 to 625 per day.Bob should hire the 1,001^st worker only if:

Question

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To determine whether Bob should hire the 1,001st worker, we need to compare the additional cost of hiring that worker (i.e. his/her daily wage) to the additional revenue that worker will generate by increasing output by 10 units.

The additional cost of hiring the 1,001st worker is simply the wage paid to that worker. Let's call this w. If output goes from 615 units to 625 units when another worker is added, then each worker is responsible for producing 0.01 units of output (i.e. 10 units of output divided by 1,000 workers). So, the additional revenue generated by the 1,001st worker is:

10 units x $3/unit = $30

Since the additional revenue of $30 exceeds the additional cost of hiring the worker (i.e. the wage, w), Bob should hire the 1,001st worker as long as w is less than or equal to $30. The only choice that fits this condition is B, which states that the wage must be $30 or less per day.