Question

ABC Electronics wants to hire the optimal number of security guards to prevent thefts from its large superstore. The following table shows how the number of guards will affect the volume of thefts per week.

# guards                  Total Revenue Product                     MRP                             MC

0                                  $0                                            --                                --

1                                  $1600                                       $1600

2                                  $2400

3                                  $3050

4                                  $3560

5                                  $3900

# guards           Total Revenue Product                          MRP                             MC

0                                  $0                                            --                                 --

1                                  $2400

2                                  $3600

3                                  $3975

QUESTION 1

1. 1. If you hire guards from the first company, shown in part a, how many should you hire to maximize profits?

   ENTER ONLY THE NUMBER ANSWER AND NOTHING ELSE

2.5 points   

QUESTION 2

1. 2. If you use the second firm, the premium firm shown in part b, how many guards should you hire to maximize profits?

2.5 points   

QUESTION 3

1. 3. Which is the better option:

   A   hiring the guards from the first firm as you calculated for question 1

   B   hiring the guards from the premier firm as you calculated for question 2

   ENTER ONLY A or B. NOTHING ELSE.

2.5 points   

QUESTION 4

1. Select the answer that best explains the reason you chose the firm you did.  ENTER THE LETTER OF YOUR CHOICE, A B C or D

   A   I picked the one with the greatest Total Revenue Product, because either option will have the same total cost.

   B I picked the option with the greatest Marginal Revenue Product

   C   I picked the option with the lowest total cost

   D   I picked the option that will allow me to hire the most guards

Answer 1

a)ABC Electronics wants tohire the optimal number of security guards,For that the below describes about how the number of guards will affect the volume of thefts per week.It explains through marginal revenue and marginal cost.

The profit maximizing level is where marginal revenue is above or equal to marginalcost.when three guards are employed, marginal revenue is $650 and marginalcost is $600. Hence 3 guards should be hired.because I would hire guards till MRP>=MC, in order to maximize profits.

The profit maximizing level is where marginal revenue is above or equal to marginalcost.when 2 guards are employed, marginal revenue is $1200 and marginalcost is $1000. Hence 2 guards should be hired,if I hire guards from the premium firm, I would hire 2 guards because I would hire guards till MRP>=MC.

3) The better option is to hire guards from the first firm.

4) mainly here i picked up the option that willallow me more guards (Option D).