High Tech, Inc. produces plastic chairs that sell for $10 each. The following table provides information about how many plastic chairs can be produced per hour. $$\begin{array} { | c | c | }
\hline \text { Number of Workers } & \text { Chairs Produced Per Hour } \
\hline 0 & 0 \
\hline 1 & 10 \
\hline 2 & 18 \
\hline 3 & 24 \
\hline 4 & 28 \
\hline 5 & 30 \
\hline
\end{array}$$ For simplicity, assume that labor is the only input. How many workers will be hired if the hourly wage for workers is $70?

Question

High Tech, Inc. produces plastic chairs that sell for $10 each. The following table provides information about how many plastic chairs can be produced per hour. $$\begin{array} { | c | c | } 
\hline \text { Number of Workers } & \text { Chairs Produced Per Hour } \
\hline 0 & 0 \
\hline 1 & 10 \
\hline 2 & 18 \
\hline 3 & 24 \
\hline 4 & 28 \
\hline 5 & 30 \
\hline
\end{array}$$ For simplicity, assume that labor is the only input. How many workers will be hired if the hourly wage for workers is $70?

Quizplus · Accepted Answer

From the table, we see that the marginal benefit of hiring an additional worker decreases as the number of workers increases. At $70 hourly wage, we should hire the workers until their marginal benefit (in revenue) equals to $70. This occurs when two workers are hired since the marginal benefit for the second worker is $18 - $10 = $8, which increases from the marginal benefit of the first worker which is $10 - $0 = $10. Therefore, we should hire 2 workers.

High Tech, Inc For Simplicity, Assume That Labor Is the Only Input