{"id":198710,"date":"2025-03-10T09:08:47","date_gmt":"2025-03-10T09:08:47","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=198710"},"modified":"2025-03-10T09:08:50","modified_gmt":"2025-03-10T09:08:50","slug":"a-firm-is-thinking-of-hiring-an-additional-worker-to-their-organization-who-they-believe-can-increase-total-productivity-by-100-units-a-week","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/03\/10\/a-firm-is-thinking-of-hiring-an-additional-worker-to-their-organization-who-they-believe-can-increase-total-productivity-by-100-units-a-week\/","title":{"rendered":"A firm is thinking of hiring an additional worker to their organization who they believe can increase total productivity by 100 units a week"},"content":{"rendered":"\n
A firm is thinking of hiring an additional worker to their organization who they believe can increase total productivity by 100 units a week. The cost of hiring him or her is $1,500 per week. If the price of each unit is $12,<\/p>\n\n\n\n
a. the MR of hiring the worker is $1,500<\/p>\n\n\n\n
b. the MC of hiring the worker is $1,200.<\/p>\n\n\n\n
c. the firm should not hire the worker since MB<\/p>\n\n\n\n
d. All the above<\/p>\n\n\n\n
The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n
Let’s analyze the firm’s decision on whether to hire an additional worker.<\/p>\n\n\n\n
Given Information:<\/h3>\n\n\n\n
\n
The additional worker increases total productivity by 100 units per week<\/strong>.<\/li>\n\n\n\n
The price per unit<\/strong> of the product is $12<\/strong>.<\/li>\n\n\n\n
The cost of hiring<\/strong> the worker is $1,500 per week<\/strong>.<\/li>\n<\/ul>\n\n\n\n
Step 1: Marginal Revenue (MR)<\/h3>\n\n\n\n
Marginal Revenue (MR) is the additional revenue generated from hiring the worker. It is calculated as:<\/p>\n\n\n\n
[ MR = \\text{additional output} \\times \\text{price per unit} ]<\/p>\n\n\n\n
[ MR = 100 \\times 12 = 1,200 ]<\/p>\n\n\n\n
Step 2: Marginal Cost (MC)<\/h3>\n\n\n\n
Marginal Cost (MC) is the cost of hiring the additional worker, which is $1,500 per week<\/strong>.<\/p>\n\n\n\n
Step 3: Decision Analysis<\/h3>\n\n\n\n
The firm should compare the Marginal Benefit (MB) or Marginal Revenue (MR)<\/strong> with the Marginal Cost (MC)<\/strong>:<\/p>\n\n\n\n
\n
If MR > MC<\/strong>, hiring is profitable.<\/li>\n\n\n\n
If MR < MC<\/strong>, hiring is a loss-making decision.<\/li>\n<\/ul>\n\n\n\n
Here, MR = $1,200<\/strong> and MC = $1,500<\/strong>, so:<\/p>\n\n\n\n
[ MR < MC ]<\/p>\n\n\n\n
This means that hiring the worker is not profitable<\/strong> since the additional revenue generated is lower<\/strong> than the cost of hiring.<\/p>\n\n\n\n
Correct Answer:<\/h3>\n\n\n\n
(c) The firm should not hire the worker since MB < MC.<\/strong><\/p>\n\n\n\n
Explanation:<\/h4>\n\n\n\n
Since the firm would lose $300 per week<\/strong> by hiring this worker ($1,500 cost vs. $1,200 revenue), the rational decision is not to hire<\/strong>. In competitive business environments, firms aim to maximize profit<\/strong>, so hiring when MR < MC leads to losses.<\/p>\n\n\n\n<\/figure>\n\n\n\n
Here is an image illustrating the economic decision analysis regarding hiring an additional worker. It visually represents the comparison between Marginal Revenue (MR) = $1,200<\/strong> and Marginal Cost (MC) = $1,500<\/strong>, highlighting that hiring the worker is not a profitable decision. Let me know if you need further modifications!<\/p>\n","protected":false},"excerpt":{"rendered":"
A firm is thinking of hiring an additional worker to their organization who they believe can increase total productivity by 100 units a week. The cost of hiring him or her is $1,500 per week. If the price of each unit is $12, a. the MR of hiring the worker is $1,500 b. the MC […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-198710","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/198710","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=198710"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/198710\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=198710"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=198710"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=198710"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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<\/figure>\n\n\n\n