A firm employs 10 workers at a weekly wage of $500.If it employs an eleventh worker,it has to raise all of its workers wage to $520.The eleventh worker adds $750 a week to revenues.If the firm hires the eleventh worker,its weekly profits will
A) go up by $230.
B) go up by $30.
C) go up by $23.
D) go down by $270.

Question

Quizplus · Accepted Answer

Before hiring the eleventh worker, the total wage bill for the 10 workers was:

10 workers * $500/week = $5000/week

If the firm hires the eleventh worker, it will have to pay all workers $520/week. So, the new total wage bill will be:

11 workers * $520/week = $5720/week

This is an increase of $720/week from the previous wage bill ($5720 - $5000).

However, the eleventh worker adds $750/week to revenues. So, the net increase in profits will be:

Net increase in profits = Increase in revenues - Increase in wage bill
Net increase in profits = $750/week - $720/week
Net increase in profits = $30/week

Therefore, by hiring the eleventh worker, the firm's weekly profits will go up by $30.

A Firm Employs 10 Workers at a Weekly Wage of $500.If