Luigi's Pizzeria is considering to hire two more workers, Jessie and Kathy. Suppose that the market wage for another worker is $80 per day. Jessie would generate a marginal product of 10 pizzas, while Kathy would generate a marginal product of 9 pizzas. If pizzas sell for $9 each, what should Luigi do?Luigi should hire only the first additional worker, Jessie.Luigi should not hire either additional worker.Luigi should hire only the second additional worker, Kathy.Luigi should hire both workers as long as their marginal products do not change.

Respuesta :

Answer:

Luigi should hire both workers as long as their marginal products do not change.

Explanation:

Luigi should hire additional workers as long as the marginal cost of hiring is less than the marginal product of labor, because in this situation, any additional worker will be producing more benefit to the pizzeria.

In this case, both Kathy and Jessie have a marginal cost of $80 per day.

Jessie's marginal product is 10 pizzas, and each pizza sells for $9, therefore, her total marginal product is = 10 x $9 = $90, which is higher than her marginal cost of $80, thus, she should be hired.

Kathy's marginal product is 9 pizzas, her total marginal product is = 9 x $9 = $81, which is still higher than her marginal cost of $80, even if only by one dollar.