Question

Cindy is a baker and runs a large cupcake shop. She has already hired 11 employees and is thinking of hiring a 12th. Cindy estimates that a 12th worker would cost her $100 per day in wages and benefits while increasing her total revenue from $2,600 per day to $2,750 per day.

Should Cindy hire a 12th worker?
a. Yes
b. No
c. You need more information to figure this out

Answer 1

A: Yes

Step-by-step explanation:

The additional worker would cost $100 per day i.e. Marginal Cost = $100

Whereas the Marginal Revenue = (2,750-2,600) = $150

Since Marginal revenue exceeds marginal cost by (150-100) = $50, Cindy should hire 12th worker.