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Homework answers / question archive / Recently, some college alumni started a moving service for students living on campus
Recently, some college alumni started a moving service for students living on campus. They have 3 employees and are debating hiring 1 more. The hourly wage for an employee is $30 per hour. An average moving job takes 4 hours. The company currently does 3 moving jobs per week, but with 1 more employee, the company could manage 5 jobs per week. The company charges $100 for a moving job.
Instructions:
a. What would be the new employees' marginal product of labor?
b. What is the value of that marginal product?
a)
Here, the marginal productivity of hiring one more employee can be estimated as:
Marginal Productivity = Change in number of moving jobs in a week / Increment in the number of an employee by one unit
Marginal Productivity = 5-3 / 1
Marginal Productivity = 2
Henceforth, the marginal productivity of a new employee is 2 moving jobs in a week
b)
We know that
Value of the marginal product = Wage rate * Marginal productivity
Value of the marginal product = $100 * 2
Value of the marginal product = $200
