Question

You have been hired by the No Hassle Collection Agency to provide economic advice. The owner of the agency tells you that No Hassle's only variable input is the number of collection agents. The hourly wage for collection agents is $30.00. The marginal revenue product curve for collection agents reaches its maximum at five workers with a marginal revenue product of $34.00. What advice would you give this firm? Shut down immediately, as the firm is not able to cover all of its variable costs. Decrease the wage rate paid to collection agents so that their marginal revenue product will decrease. Hire five collection agents so as to maximize profits. Hire collection agents until the marginal revenue product is equal to the wage — which will occur when more than five agents are employed.

Answer 1

Hire collection agents until the marginal revenue product is equal to the wage — which will occur when more than five agents are employed

Step-by-step explanation:

Hire collection agents until the marginal revenue product is equal to the wage — which will occur when more than five agents are employed is the advice I would give because the marginal revenue product curve for collection agents have already reaches its maximum at five workers with a marginal revenue product of $34.00 while the hourly wage for collection agents is $30.00, therefore in this type of scenario the best thing that Hassle Collection Agency will do is to hire more collection agency pending the time that the MARGINAL REVENUE PRODUCT will adequately equal with the wages which will in turn be of benefit to the agency.