Asked by Stephan Polit on Jul 23, 2024
Verified
Refer to Figure 18-8. Suppose the shop charges $125 per repair. Over what interval of wages, W, would the shop maximize its profit by hiring exactly 4 mechanics? (Determine W1 and W2 such that W1 < W < W2 ).
Profit Maximizing
Profit maximizing is the process or strategy undertaken by a firm to determine the best output level and price point that leads to the highest profit.
Mechanics
A division of physics focused on understanding how objects move and the roles that forces play in affecting this motion.
Wages
Payments made to workers for their services, typically calculated on an hourly, daily, or piecework basis, and paid weekly, biweekly, or monthly.
- Understand the mathematical correlation between the number of employees employed, their marginal output, and the optimal levels of production.
Verified Answer
AH
AngelRose HarveyJul 28, 2024
Final Answer :
The marginal product of the fourth mechanic is 17 - 15 = 2 repaired cars, implying a value of the marginal product of $125 X 2 = $250. The marginal product of the fifth mechanic is 18 - 17 = 1 repaired car, implying a value of the marginal product of $125 X 1 = $125. Thus, the shop would maximize its profit by hiring exactly 4 mechanics if and only if $125 < W < $250.
Learning Objectives
- Understand the mathematical correlation between the number of employees employed, their marginal output, and the optimal levels of production.