An agency is having problems with personal phone calls made during working hours. Each minute of...

Question:

An agency is having problems with personal phone calls made during working hours. Each minute of a personal call costs the agency $0.50 in wasted wages. The agency decides to hire operators to monitor calls in order to attain the optimal number of personal calls (minimize total cost of personal calls).

Number of Operators Total minutes of personal calls (per hour)
0 700
1 570
2 460
3 370
4 300
5 250

a. What is the most the agency would be willing to pay the first operator?

b. If operators receive $38 an hour, how many operators should the agency hire?

c. Assume a change in the operator labor market results in operator wages rising to $47 an hour; how would this affect the number of operators the agency should optimally hire?

d. Assume that operators receive $38 an hour again, but that the cost of personal calls rises to $0.75 in wasted wages. How many operators should the agency hire?

Marginal Benefit and Marginal Cost Analysis:

Marginal Benefit is extra benefit that is achieved when one more quantity of a good is used. Marginal cost is the extra cost when more quantity is used. The consumer will consume till the unit where marginal benefit is equal to the marginal cost.

Answer and Explanation:

Number of Operators Total minutes of personal calls (per hour) Marginal Benefit Marginal Benefit (in terms of reduction in wages when additional...

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Marginal Analysis in Economics: Definition, Formula & Examples

from Introduction to Business: Homework Help Resource

Chapter 3 / Lesson 48
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