A small consulting firm is only interested in hiring graduates (denoted by S), but it does not know how many it should hire in order to be profit maximizing. Assume there is a competitive wage of $20 per hour and the production function is F(S)= 100S – (1/8)S2 . Hiring additional workers will increase production F(S) over relevant ranges of S. But is the 51st S more valuable than the 50th S in terms of her additions to overall production? What quantity of graduates should this firm hire and why does it stop hiring at this level of S? How does your answer change if the production function is F(S)= 200S –(1/8)S2 and the wage increases to $22?
A small consulting firm is only interested in hiring graduates (denoted by S), but it does not know how many it should hire in order to be profit maximizing. Assume there is a competitive wage of $20 per hour and the production function is F(S)= 100S – (1/8)S2 . Hiring additional workers will increase production F(S) over relevant ranges of S. But is the 51st S more valuable than the 50th S in terms of her additions to overall production? What quantity of graduates should this firm hire and why does it stop hiring at this level of S? How does your answer change if the production function is F(S)= 200S –(1/8)S2 and the wage increases to $22?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A small consulting firm is only interested in hiring graduates (denoted by S), but it does not know how many it should hire in order to be profit maximizing. Assume there is a competitive wage of $20 per hour and the production function is F(S)= 100S – (1/8)S2 . Hiring additional workers will increase production F(S) over relevant ranges of S. But is the 51st S more valuable than the 50th S in terms of her additions to overall production? What quantity of graduates should this firm hire and why does it stop hiring at this level of S? How does your answer change if the production function is F(S)= 200S –(1/8)S2 and the wage increases to $22?
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