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The manager of All City Realtors wants to hire some real estate agents to specialize in selling housing units acquired by the Resolution Trust Commission (RTC) in its attempt to bail out the savings and loan industry. The commission paid by RTC to the company to sell these homes is $2,000 per unit sold, rather that the customary commission that is based on the sale price of a home. The manager estimates the following marginal product schedule for real estate agents dealing in government- owned housing

Number of Agents.......Marginal Product..........Marginal Revenue Product
....1............................................20
....2............................................17
....3............................................15
....4............................................12
....5............................................8
....6............................................4

a) Construct the marginal revenue product schedule by filling in the blanks in the table
MRP = P (price product sold at) x MP = 2,000x MP
# agents MP MRP@ 2,000
1 20 $40,000

b) If the manager of All City Realtors must pay a wage rate of $32,000 per year to get agents who will specialize in selling RTC housing, how many agents should the manager hire? Why?

c) If the rate falls to $18,000 per year, how many agents should the manager hire?

d) Suppose RTC raises its commission to $3,000 per unit sold. Now what is the marginal revenue product for each real estate agent employed?

e) Now that the RTC is paying $3,000 per unit sold, how many agents should the manager hire if the wage rate is $30,000?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M972893

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