Kelly Is an Architect and She Is Trying to Decide

question 19

Multiple Choice

Kelly is an architect and she is trying to decide whether to hire Mike, a draftsman, to assist with her work. Kelly could hire Mike at $20 per hour but it would take him three times as long to complete a task as it takes Kelly. Kelly is able to earn $90 per hour and has more architectural jobs than she is able to handle. Which of the following is true?

• A) Kelly should not hire Mike because it would be faster for her to do the work herself.
• B) Kelly should do the drafting work herself because she has the lower opportunity cost.
• C) Mike should be hired at the $20 per hour wage rate.
• D) Mike should be hired, but only if he is paid more than $30 per hour.

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Definitions:

Labor Tax

Taxes levied on the wages and income generated from labor, which can affect employment and labor supply decisions in the economy.

Deadweight Loss

A loss of economic efficiency that occurs when the equilibrium outcome is not achievable or not achieved.

University

An institution of higher education and research which awards academic degrees in various academic disciplines and provides both undergraduate education and postgraduate education.

Tax

Compulsory payments made to the government, imposed on earnings from employment and profits from businesses, or included in the price of certain goods, services, and dealings.