Recently, some college alumni started a moving service for students living on campus. They have three employees and are debating hiring a fourth. The hourly wage for an employee is $18 per hour. An average moving job takes three hours. The company currently does three moving jobs per week, but with one more employee, the company could manage five jobs per week. The company charges $80 for a moving job. a. What would be the new employees' marginal product of labor? 5 jobs per weekb. What is the value of that marginal product?c. Should the moving service hire a fourth worker?

The employees' marginal product of labor is 2 jobs/employee.

The value of that marginal product is $160.

The moving service hire a fourth worker, as the additional revenue is greater than the additional cost.

Explanation:

The employee's marginal product of labor is the additional output that the company gets out of an additional worker, at the actual level of production. In this case, as the company would go from 3 jobs to 5 jobs with the addition of an employee, the employee's marginal product of labor is 2 jobs/worker.

The value of marginal product is the value of this additional jobs that an additional employee will bring. In this case, each job is charged $80, so the value of that marginal product is 2*80=$160.

The cost of an additional employee is 3*18=$54. As the additional income ($160) is greater than the additional cost of a employee ($54), they should hire a fourth worker.

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