The table below shows how total donations, average donations, total labor costs and average labor costs vary depending on the number of employees State U hires for its fundraising activities. $$\begin{array} { | c | c | c | c | c | }
\hline \begin{array} { c }
\text { Number of } \
\text { Employees }
\end{array} & \begin{array} { c }
\text { Total } \
\text { Donations }
\end{array} & \begin{array} { c }
\text { Average } \
\text { Donations }
\end{array} & \begin{array} { c }
\text { Total } \
\text { Labor Costs }
\end{array} & \begin{array} { c }
\text { Average } \
\text { Labor Costs }
\end{array} \
\hline 1 & \$ 30,000 & & & \$ 8,000 \
\hline 2 & \$ 42,426 & & \$ 17,000 & \
\hline 3 & & \$ 17,321 & \$ 27,000 & \
\hline 4 & \$ 60,000 & & & \$ 9,500 \
\hline 5 & & \$ 13,416 & \$ 50,000 & \
\hline
\end{array}$$ The Chair of the Economics Department at State U says that fundraising employees should be hired as long as their marginal benefit exceeds their marginal cost. If the University follows this advice, then ______ employee(s) will hired, and the net benefit (total donations minus total labor costs) will be ______.

Question

The table below shows how total donations, average donations, total labor costs and average labor costs vary depending on the number of employees State U hires for its fundraising activities. $$\begin{array} { | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Number of } \
\text { Employees }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Donations }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Donations }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Labor Costs }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Labor Costs }
\end{array} \
\hline 1 & \$ 30,000 & & & \$ 8,000 \
\hline 2 & \$ 42,426 & & \$ 17,000 & \
\hline 3 & & \$ 17,321 & \$ 27,000 & \
\hline 4 & \$ 60,000 & & & \$ 9,500 \
\hline 5 & & \$ 13,416 & \$ 50,000 & \
\hline
\end{array}$$ The Chair of the Economics Department at State U says that fundraising employees should be hired as long as their marginal benefit exceeds their marginal cost. If the University follows this advice, then ______ employee(s) will hired, and the net benefit (total donations minus total labor costs) will be ______.

Quizplus · Accepted Answer

The marginal benefit of hiring the second employee is $12,426 ($42,426 - $30,000), and the marginal cost is $9,000 ($17,000 - $8,000). Since the marginal benefit exceeds the marginal cost, two employees should be hired. The net benefit is $42,426 (total donations) minus $17,000 (total labor costs), which equals $25,426.

The Table Below Shows How Total Donations, Average Donations, Total