A Toy Manufacturer Is Experiencing Quality Problems on Its Assembly

question 65

Multiple Choice

A toy manufacturer is experiencing quality problems on its assembly line. Every defective toy that leaves the factory costs the firm $20. The firm has decided to hire quality inspectors to catch defective toys before they leave the factory.

$\begin{array}{ll}\text { Nimber of } & \text { Number of Defective } \\\text { Inspectors } & \text { Toys (per day) }\\0 & 40 \\1 & 24 \\2 & 16 \\3 & 10 \\4 & 6 \\5 & 2 \\6 & 0\end{array}$
-If the cost of each defective toy rises to $50, while inspectors are paid $150 a day, how many inspectors should the firm hire?

• A) 3
• B) 4
• C) 5
• D) 6

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Definitions:

Equilibrium

The point at which the quantity of a good or service demanded equals the quantity supplied, determining the market price.

Total Surplus

In a market, the complete societal benefits are represented by the combined value of consumer and producer surplus.

Demand

The desire for a particular good or service, backed by the ability and willingness to pay for it.

Supply

The total amount of a good or service available for purchase at any given price level.