Question

Joe Fixit has an appliance- repair business. He has more business than he can handle and wants to hire another person. Joe estimates that three appliances can be repaired each hour by a qualified person.

Joe bills out labor at $45 per hour, but he stipulates that the minimum charge for appliance - repair estimates is $30 plus parts.
What is the marginal revenue product of a qualified repair person?
What is the maximum hourly wage that he would pay an employee?

Answer 1

A. $90

B. $90 per hour

Step-by-step explanation:

Calculation for the marginal revenue product of a qualified repair person

Using this formula

Marginal revenue product= Numbers of appliance repairs per hour * Estimated minimum charge for appliance repair

Let plug in the formula

Marginal revenue product= 3 appliance*$30

Marginal revenue product=$90

Therefore the marginal revenue product of a qualified repair person will be $90

B Based on the above calculation the maximum hourly wage that he would pay an employee will be $90 (3 appliance repairer per hour*$30) reason been that we have bring in extra amount of $90 per hour because of the additional one more repairer that was hired or employed .

Therefore the maximum hourly wage that he would pay an employee will be $90 per hour