Maddie Factory has employed 20 workers whose average product is 1000kg’s of wheat. Each worker is given a wage of K2000 whilst the price of each bag of wheat is K20.

Maddie Factory has employed 20 workers whose average product is 1000kg’s of wheat. Each worker is given a wage of K2000 whilst the price of each bag of wheat is K20. The factory is considering hiring an additional worker who produces 2000 bags but demands a wage of K3000. Should the additional worker be hired? Show your full working.

Solutions

Expert Solution

there are two scenarios

1. when the wage of the only last worker increased

the worker should be hired if the marginal revenue product of the worker is higher than or equal to the wage.

Marginal revenue product of a worker =marginal product of the worker*price =2000*20=40000

the marginal revenue product is higher than the wage demanded by the worker so it is profitable to hire and the firm should higher the worker.

====

2. When the wage of all the worker is increased

The marginal profit should be positive to hire the next worker

Total product =average product * number of workers

the total product of 20 workers =1000*20=20000

total revenue =total product * price =20000*20=400000

total labor cost =wage * number of workers =2000*20=40000

profit =400000-40000=360000

=======

after the new workers

total labor cost =21*3000=63000

total product =old total product + marginal product of the employee=20000+2000=22000

total revenue =22000*20=440000

Profit =440000-63000

=377000

Marginal profit =new profit -old profit

=377000-360000

=K17000

the marginal profit is positive so the firm should hire 21st worker to increase its profit by K17000

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

A company has employed two workers A and B whose productivities are 20 units and 15...

A company has employed two workers A and B whose productivities are 20 units and 15 units respectively. The wage for A is K12 whilst B’s is K8. Are these two employees optimally employed? [5 Marks] The average total cost of producing a tomato unit and the average variable cost are K2 and K1 respectively. Further, price is K10 and the firm operates in a competitive market. Calculate the fixed and total costs of producing 1000 units of tomatoes. [4...

1. If the average product of 14 workers is 50 bushels of wheat and the average...

1. If the average product of 14 workers is 50 bushels of wheat and the average product of 15 workers of wheat is 55 bushels of wheat, then the marginal product of the 15th worker was ___________ bushels of wheat. 2. Which of the following is most likely to be a fixed cost for a bakery firm? A. Wages paid to workers B. Paying for ingredients from a food supplier C. The monthly electricity bill D. Paying rent each month...

Given that wage is $10. The last worker hired by Cal's Corn Farm added 20 ears...

Given that wage is $10. The last worker hired by Cal's Corn Farm added 20 ears of corn. The price of 4 ears of corn is $1. Should Cal hire the last worker? Explain why the long-run average cost is typically U-shaped. Explain the connection between the shape of long run average cost curve and returns to scale.

Mauro Products distributes a single product, a woven basket whose selling price is $20 and whose...

Mauro Products distributes a single product, a woven basket whose selling price is $20 and whose variable expense is $17.6 per unit. The company’s monthly fixed expense is $5,760. Required: 1. Solve for the company’s break-even point in unit sales using the equation method. (Do not round your intermediate calculations.) 2. Solve for the company’s break-even point in dollar sales using the equation method and the CM ratio. (Do not round intermediate calculations. Round "CM ratio percent" to nearest whole...

b) Suppose that the nominal wage you pay each worker is $300 and that the price of your output is $12.

Number of workersunits of outputMPNReal Marginal ProfitReal Profit014027531054130515061657175b) Suppose that the nominal wage you pay each worker is $300 and that the price of your output is $12. How many workers will you hire and what would be your real profit? Note that if you break even on the worker, you will hire them! Also, just like the in-class example, you can hire all the workers you want at the wage = $300.In the space below, draw a graph with...

A large Factory space has an average occupancy of 45 people (only male workers in this...

A large Factory space has an average occupancy of 45 people (only male workers in this space) they are doing light bench work. The average light level is 1.5W/ft2 of recessed, vented to return air fluorescent fixtures. Other production equipment create a total heat gain of 3 W/ft2. Compute the total sensible and total latent heat gain for the space. The floor area is 7500 ft2. For the sensible heat gain, estimate the radiative and convective portions for each type...

each worker employed by risky business has a 25 percent chance of losing his or her...

each worker employed by risky business has a 25 percent chance of losing his or her job in the next year. each worker employed bu safe business has a 2 percent chance of losing his or her job. you manage an insurance company that provides a lump sum of $10,000 to each unemployed worker. a. the minimum amount you would charge risky business for each employee covered by the unemployment policy is $____ b. the minimum amount you would charge...

4. If the output price is $5 per package, the rent for the capital is $50 per truck, and the wage of labor is $100 per worker, what is the profit if 3 trucks are rented and 20 workers are hired?

Table 3-PEX2: A Production Function with Capital and LaborCapital 6 346 490 600 692 775 846(trucks) 5 316 448 548 632 705 7754 282 400 490 564 632 6923 245 346 423 490 548 6002 200 282 346 400 448 4901 141 200 245 282 316 34615 16 17 18 19 20Labor (workers)4. If the output price is $5 per package, the rent for the capital is $50 per truck, and the wage of labor is $100 per worker, what...

A toy manufacturing company has the following output figures per each number of workers employed, as...

A toy manufacturing company has the following output figures per each number of workers employed, as shown in the table below. Compute the short-run average and marginal products for each worker. Number of workers Output Average product Marginal product 1 1 200 2 2 500 3 3 780 4 4 400 5 4 800 1.2 Based on your calculations in 1.1, at what number of workers will diminishing returns start to set in? Explain your answer. 1.3 Distinguish between cardinal...

A garments factory has 60 employees.Out of these 60 employees, 20% i-e 12 workers are involved...

A garments factory has 60 employees.Out of these 60 employees, 20% i-e 12 workers are involved in aparticular project. The remaining is not directly involved in thatproject. Out of the given budget of the project, the factory isfacilitating and giving 80% of their total employees who are 48 innumber and giving extra benefits to them. In connection with theproject, the factory is working on a shipment. It has been observedat the end of delivering the shipment that the entire project...

Subjects