Optimal Input Level. U-Do-It Furniture, Inc., sells hardwood chairs, in both kits and fully assembled forms. Customers who assemble their own chairs benefit from the lower kit price of $35 per chair. "Full-service" customers enjoy the luxury of an assembled chair, but pay a higher price of $60 per chair. Both kit and fully assembled chair prices are stable. The company has observed the following relation between the number of assembly workers employed per day and assembled chair output:

A. Construct a table showing the net marginal revenue product derived from assembly worker employment.
B. How many assemblers would U-Do-It Furniture employ at a daily wage rate of $75?
C. What is the highest daily wage rate U-Do-It Furniture would pay to hire four assemblers per day?

Question

Optimal Input Level. U-Do-It Furniture, Inc., sells hardwood chairs, in both kits and fully assembled forms. Customers who assemble their own chairs benefit from the lower kit price of $35 per chair. "Full-service" customers enjoy the luxury of an assembled chair, but pay a higher price of $60 per chair. Both kit and fully assembled chair prices are stable. The company has observed the following relation between the number of assembly workers employed per day and assembled chair output:
 
 A. Construct a table showing the net marginal revenue product derived from assembly worker employment.
B. How many assemblers would U-Do-It Furniture employ at a daily wage rate of $75?
C. What is the highest daily wage rate U-Do-It Furniture would pay to hire four assemblers per day?

Quizplus · Accepted Answer

The Answer of Optimal Input Level. U-Do-It Furniture, Inc., sells hardwood chairs, in both kits and fully assembled forms. Customers who assemble their own chairs benefit from the lower kit price of $35 per chair. "Full-service" customers enjoy the luxury of an assembled chair, but pay a higher price of $60 per chair. Both kit and fully assembled chair prices are stable. The company has observed the following relation between the number of assembly workers employed per day and assembled chair output:
 
 A. Construct a table showing the net marginal revenue product derived from assembly worker employment.
B. How many assemblers would U-Do-It Furniture employ at a daily wage rate of $75?
C. What is the highest daily wage rate U-Do-It Furniture would pay to hire four assemblers per day?