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?
A. Hire collection agents until the marginal revenue product is equal to the wage-which will occur when more than five agents are employed.
B. Hire five collection so as to maximize profits.
C. Decrease the wage rate paid to collection agents so that their marginal revenue product will decrease.
D. Shut down immediately, as the firm is not able to cover all of its variable costs.
Answer: A
You might also like to view...
Suppose a technology is described by the production function 
a. For a price taking producer who faces output price p and wage w, derive the first order condition and interpret it.
b. Without knowing more about the function f, is the condition you derived in (a) either necessary or sufficient for deriving the profit maximizing production plan? Explain.
c. Suppose 
. Derive the first order condition you illustrated in (a) and solve for 
.
d. For what values of 
is this first order condition necessary and sufficient for deriving a profit maximizing production plan? Explain.
What will be an ideal response?
A telephone company that charges both a monthly fee plus a price per minute used are employing:
A. price discrimination based on observable customer characteristics. B. perfect price discrimination. C. a two-part tariff. D. the profit-maximizing rule.
What is the relationship between the MRP and MPP of labor?
a. MRP is MPP multiplied by the price of the good. b. MPP is MRP multiplied by the price of the good. c. MRP is MPP divided by the price of the good. d. MPP is MRP divided by the price of the good. e. MPP is the wage rate that in equilibrium equals MRP.
A system by which firms assign their customers for collection purposes to regional banks that transfer funds to a central bank is known as:
A) A lock-box system B) A zero-balance account C) A wire transfer D) Concentration banking