Question

Juan wants to increase production at his confection shop. If he hires one more worker, he can increase output by 100 candies per week. A confection worker's weekly wage is $200. Juan's marginal cost of increasing output by 100 candies per week is ______.

Answer 1

Juan's marginal cost of increasing output by 100 candies per week is $2 per candy, which is calculated by dividing the worker's weekly wage by the number of additional candies produced.

Step-by-step explanation:

The student has asked about the marginal cost for Juan to increase production in his confection shop by hiring one more worker. Marginal cost is the cost of producing one more unit of output. In this case, if Juan hires another worker at a weekly wage of $200 to produce an extra 100 candies per week, the marginal cost per candy would be $2 (which is calculated by dividing the weekly wage of $200 by the 100 additional candies). It's important to note that this does not take into account any other potential costs or revenues associated with producing the candies.

Moreover, if we consider that a worker is worth to the firm up to the amount of revenue they can generate, and assuming they are paid their full value, then Juan should be able to pay more than $8 per hour if the revenues generated per hour exceed this wage cost.