You Have Been Hired by a Data Processing Firm to Provide

question 118

Multiple Choice

You have been hired by a data processing firm to provide economic advice. The owner of the firm tells you that the firm's only variable input is the number of data-entry operators. The hourly wage for data-entry operators is $15.00. The marginal revenue product curve for data-entry operators reaches its maximum at three workers with a marginal revenue product of $12.00. What advice would you give this firm?

• A) Hire three data-entry operators so as to minimize the amount of money the firm will lose.
• B) Shut down immediately, as the firm is not able to cover all of its variable costs.
• C) Increase the wage rate paid to data-entry operators so that their marginal revenue product will increase.
• D) Produce as much as possible so as to maximize the difference between the wage paid to data-entry operators and their marginal revenue product.

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Definitions:

Executory Costs

Expenses arising from operational agreements, such as leases, which are not yet settled.

Periodic Lease Rental Payments

Regular payments made by a lessee to a lessor for the use of property, equipment, or vehicles, typically established under a lease agreement.

Direct Financing Lease

A leasing arrangement in which the lessor finances the leased asset, and the lessee's payments are structured to cover the asset's costs and provide a return to the lessor.