Question

The owner of a car wash calculates that by hiring one additional worker, the car wash can wash 50 more cars per week at an average of $5 per wash. The owner will pay the worker $9 per hour for 30 hours per week.

What do you think the owner’s decision will be when considering marginal costs and benefits? The owner will hire the worker because the marginal costs of $250 per week are less than the marginal benefits of $270 per week.


The owner will hire the worker because the marginal costs of $270 per week will be offset by the benefit of doing more car washes each week.


The owner will not hire the worker because the marginal costs of $270 per week are greater than the marginal benefits of $250 per week.


The owner will not hire the worker because the marginal costs of $250 per week are less than the marginal benefits of $270 per week.

Answer 1

marginal cost=cost of adding 1 more worker
marginal benefit=benefit of adding 1 more worker


marginal cost=$9 per hour for 30 hours or $270
marginal benefit=$5 per car times 50 cars=$250

270>250
marginal cost>marginal benefit
nope, won't hire because cost>benefit
and profit is negative



3rd option