1. George, the owner of a car wash is trying to decide on the number of people to employ based on the following short-run production function:

Q = 6L - 0.5L2
Where Q = number of car washes per hour and L = number of workers.

a) Generate a schedule showing total product, average product and marginal product.

b) The price of a basic car wash is $50. How many workers should he hire if each worker is paid $60/hour?

c) Elucidate he is considering hiring students on a part-time basis for $40/hour, do you think he should do so?

3. Automated Labs uses 5 workers and 200 machines to produce its product. The MP of the last worker is 2 units of output/day; the MP of the last machine is 400 units of output/day. The daily paid for each worker is $100 and the rental of each machine is $300/day.

a) What is the MP per dollar spent on a worker?

b) What is the MP per dollar spent on machine?

c) Are workers and machines being utilized in the cost-minimizing manner?

Ear Us Limited is a manufacturer of pen radios in Montserrat. The company is having too many defective radios coming off the assemble line. The company estimated that sales of the radios fell by US$500 for every defective radio that was sold to the market. The Chief Engineer (CE) has recommended that inspectors be hired to reduce the number of defective radios leaving the assemble line. The CE has made a schedule, showing the number of defective radios that will leave the assemble line if inspectors were to be hired.

INSPECTORS DEFECTIVE RADIOS
0 400
1 360
2 300
3 220
4 120
5 60
6 30
7 25
8 22
9 20
The cost of hiring an inspector is US$2,000 per month. How many inspectors should be hired? Explain!