1. An agency is having problems with personal phone calls made during working hours. Each minute of a personal call costs the agency $0.25 in wasted wages. The agency decides to hire operators to monitor calls in order to attain the optimal number of personal calls (minimize total cost of personal calls).

Number of Operators Total minutes of personal calls (per hour)

0 1130

1 980

2 855

3 740

4 635

5 540

6 460

a. What is the most the agency would be willing to pay the first operator?

b. If operators are paid $23 an hour, how many operators should the agency hire?

c. Assume that the cost of personal calls temporarily rises to $0.29 in wasted wages. If the operator wage is still $23/hour, how many operators should the agency hire now?

d. Assume a change in the operator labor market results in operator wages rising to $28 an hour; with the cost of personal calls back at the original $0.25 per minute, how would this affect the number of operators the agency should optimally hire?