Determine marginal cost and hourly earnings, Managerial Economics

A firm hires two risk-neutral workers to assemble bicycles and pays $20 for each assembly.Charlie's marginal cost of allocating effort (measured in dollars) to the production process is

MC = 6N, where N is the number of bicycles assembled per hour. Donna's marginal cost is MC = 9N.

(a) What will be each worker's hourly earnings?

(b) Suppose the firm pays a flat wage of $25 per hour and fires any worker who does not assemble at least 2 bicycles per hour. A dismissed worker remains unemployed and has zero income. How many bicycles will each worker assemble in an 8 hour day?

 

 

Posted Date: 2/28/2013 2:22:07 AM | Location : United States







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