Asked by Rabina Pandey on Jun 26, 2024
Verified
Comfy Clothing is thinking of hiring Tom.If hired,he can increase total production by 100 units a week.He would cost the firm $1,500 a week in wages.If the price of each unit is $20,
A) The MR of hiring the worker is $1,500
B) The MC of hiring Tom is $1,500
C) The firm should hire Tom since MR>MC
D) All the above
Marginal Revenue (MR)
The increase in revenue that results from the sale of one additional unit of a product or service.
Marginal Cost (MC)
The expense associated with the production of an extra unit of a product or service.
Total Production
The aggregate amount of goods or services produced by an entity during a specific period.
- Discriminate between the notions of average and marginal cost and comprehend their influence on production and pricing decision-making.
- Discern and formulate calculations to enhance profit levels, by assessing the juxtaposition of marginal cost to marginal revenue.
Verified Answer
MP
Maulik PatelJun 30, 2024
Final Answer :
D
Explanation :
The MR (Marginal Revenue) of hiring Tom is $2,000 (100 units * $20 each), which is the additional revenue from hiring him. The MC (Marginal Cost) of hiring Tom is his wage, $1,500. Since MR ($2,000) is greater than MC ($1,500), the firm should hire Tom, making all statements correct.
Learning Objectives
- Discriminate between the notions of average and marginal cost and comprehend their influence on production and pricing decision-making.
- Discern and formulate calculations to enhance profit levels, by assessing the juxtaposition of marginal cost to marginal revenue.