Question

Kelly is an architect, and she is trying to decide whether to hire Lawrence, a draftsman, to assist with her work. Kelly could hire Lawrence at $20 per hour, but it would take him three times as long to complete a task as it takes Kelly. Kelly is able to earn $90 per hour and has more architectural jobs than she is able to handle.

Which of the following is true?

a. Kelly should not hire Lawrence because it would be faster for her to do the work herself.

b. Kelly should do the drafting work herself because she has the lower opportunity cost.

c. Lawrence should be hired at the $20 per hour wage rate.

d. Lawrence should be hired, but only if he is paid more than $30 per hour.

e. Kelly should hire someone who earns minimum wage instead of Lawrence.

Answer 1

Option (c) is correct.

Step-by-step explanation:

Lawrence can complete a task in three hours and will be paid:

= $20 × 3 hours

= $60

Three hours payment for Kelly:

= $90 × 3 hours

= $270

Kelly has more architectural jobs than she is able to handle.

Therefore, if she do the work herself, it would be faster. She'll earn $270 while $60 pays to Lawrence.

However, if she doesn't hire him then she'll lose out a complete amount of $270 if she doesn't take the more architectural jobs.

Hence, it is advisable that Lawrence should be hired at the $20 per hour wage rate.