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?
A) 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.
B) 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.
C) 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.
Eliminate
D) The owner will hire the worker because the marginal costs of $250 per week are less than the marginal benefits of $270 per week.

Answer 1

Considering marginal costs and benefits, the owner will not hire the worker because the costs outweigh the benefits, leading to a weekly net loss.

Step-by-step explanation:

The owner of a car wash is considering hiring an additional worker by analyzing the marginal costs and benefits. By hiring one more worker, the car wash can wash 50 more cars per week, potentially increasing revenues by $250 per week (50 cars × $5 per wash). However, the worker's wage is $9 per hour for 30 hours, leading to a marginal cost of $270 per week (30 hours × $9 per hour).

When deciding whether to hire additional labor, a profit-maximizing firm assesses whether the additional cost of labor, the marginal cost, is less than or equal to the additional revenue brought by that labor, known as the marginal revenue product. In this case, the calculation shows that the marginal benefits of $250 do not outweigh the marginal costs of $270.

Answer 2

D

Step-by-step explanation:

It's D, I did the test.