A firm employs Pam to assemble personal computers. Pam can assemble 1 computer if she works 1 hour, 4 computers in 2 hours, 8 computers in 3 hours, 10 computers in 4 hours, and 11 computers in 5 hours. Each computer consists of a motherboard that costs $200, a hard drive that costs $100, a case that costs $20, a monitor that costs $200, a keyboard that costs $60 and a mouse that costs $20. The cost of employing Pam is $40 per hour. The firm sells each computer for $620. How many hours should the firm employ Pam to maximize its benefit from her employment?

Question

Quizplus · Accepted Answer

To maximize the benefit from Pam's employment, we need to maximize the number of computers she can assemble in an hour. From the given data, we can create a table of the number of computers assembled by Pam in a certain time:

Time (hours)             Number of computers assembled
1                                   1
2                                   4
3                                   8
4                                  10
5                                  11

From the table, we can see that the rate at which Pam can assemble computers starts to decrease after 4 hours. Therefore, the firm should employ Pam for exactly 4 hours to assemble 10 computers. The cost of employing Pam for 4 hours is $160 ($40 × 4), and the cost of the computer parts is $1,600 [(200 + 100 + 20 + 200 + 60 + 20) × 10]. The total revenue from selling 10 computers is $6,200 (10 × $620). Therefore, the benefit from Pam's employment would be:

$6,200 - $1,600 - $160 = $4,440.

Employing Pam for any other time would result in a decrease in benefit. Therefore, the best choice is D, employ Pam for 4 hours.

A Firm Employs Pam to Assemble Personal Computers