An Auto Service Station Has Four Mechanics

question 100

Multiple Choice

An auto service station has four mechanics.If the marginal revenue product of the fourth worker is $375 per day and the mechanics are paid $150 per day,the firm

• A)can make a greater profit by laying off some of the mechanics.
• B)can make a higher profit by hiring more mechanics.
• C)is maximizing profits.
• D)will reduce its profits if it hires more mechanics.

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Definitions:

Net Income

The total profit of a company after all expenses, including taxes, have been deducted from revenues.

Closing Entries

These are journal entries made at the end of an accounting period to transfer temporary accounts to permanent accounts, hence preparing the books for the next period.

Revenue Accounts

Accounts used to record the income generated from the sale of goods or services in the normal course of business.

Expense Accounts

Accounts in financial accounting that track the costs of operating a business, including costs for materials, labor, and overhead.