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1 August, 11:05

Diane's Auto World installs tires on automobiles, light trucks, and sport utility vehicles. She is a profit-maximizing business owner whose firm operates in a competitive market. The marginal cost of installing a tire is $20. The marginal productivity of the last worker that Diane hired was 2 tires per hour. What is the maximum hourly wage that Diane was willing to pay the last worker hired?

a. There is insufficient information to answer this question.

b. $20

c. $40

d. $10

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Answers (1)
  1. 1 August, 14:31
    0
    option (c) $40

    Explanation:

    Data provided in the question:

    The marginal cost of installing a tire = $20

    The marginal productivity of the last worker = 2 tires per hour

    Now,

    The maximum hourly wage that Diane was willing to pay the last worker hired

    = marginal cost of installing a tire * marginal productivity of the last worker

    = $20 * 2

    = $40

    Hence,

    The answer is option (c) $40
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