Putski Concrete Co. hires one additional worker. Output goes up by 10 units per day.
This must have been a good (i.e. profit-maximizing) hiring decision.
True/False?
T

Question

Putski Concrete Co. hires one additional worker. Output goes up by 10 units per day. This must have been a good (i.e. profit-maximizing) hiring decision. True/False? T

UpStudy AI · Accepted Answer

1. The decision to hire an additional worker is profit‐maximizing if the marginal revenue product (MRP) of the worker is at least as high as the wage paid. That is, if

$$
   \text{MRP} \geq \text{wage}.
   $$

2. We are told that hiring the worker increases output by 10 units per day. However, to determine the worker's MRP, we would need to know the price at which each unit is sold so we can calculate

$$
   \text{MRP} = \text{Price per unit} \times 10.
   $$

3. Without knowing the sale price of the additional output or the wage paid to the worker, we cannot conclude that the marginal revenue product exceeds or meets the wage.

4. Therefore, the fact that output increases by 10 units per day does not guarantee that the hiring decision was profit-maximizing.

5. The correct answer is:

**False.**
The hiring decision was not necessarily profit-maximizing because we don't know if the increase in output (10 units per day) was enough to cover the worker's wage.

Putski Concrete Co. hires one additional worker. Output goes up by 10 units per day.
This must have been a good (i.e. profit-maximizing) hiring decision.
True/False?
T

Solución de inteligencia artificial de Upstudy

Responder

Solución

Mind Expander

preguntas relacionadas

Latest Economics Questions