Suppose Mongo runs a glue factory in Knuckle,North Dakota.Mongo wants to fire his cousin Beevo for not working very hard at making glue.If firing Beevo would save Mongo $6.11 per hour in wages and the value of Beevo's marginal product equals $7.29 per hour,to maximize his profit,Mongo should
A) fire Beevo.
B) keep Beevo employed.
C) add another worker, Teevo, Beevo's sister, whose value of the marginal product would be $4.83 per hour and whose wage would be $6.11 per hour.
D) increase the wage he pays Beevo to $7.29 per hour.
E) There is not enough information given to determine what Mongo should do.

Question

Quizplus · Accepted Answer

To maximize profit, Mongo should keep Beevo employed because the value of Beevo's marginal product ($7.29 per hour) is higher than the cost of his wages ($6.11 per hour), indicating that Beevo's work generates more value than it costs.

Suppose Mongo Runs a Glue Factory in Knuckle,North Dakota