Posted by **Dede** on Wednesday, November 24, 2010 at 4:30pm.

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:

# agents MP MRP

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 thetable.

ANSWER:

MRP = P (price product sold at) x MP = 2,000x MP

# agents MP MRP@ 2,000

1 20 $40,000

2 17 $34,000

3 15 $30,000

4 12 $24,000

5 8 $16,000

6 4 $8,000

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?

ANSWER:

MRP = W (wage)

MRP = P x MP

MRP = 2000 x 16 = $32,000

Manager should hire 3 or 3.5

workers, as the MRP at 16 MP

would be $32,000

c) If the rate falls to $18,000 per

year, how many agents should the

manager hire?

ANSWER:

MRP = P x MP

MRP = 2000 x 9 = $18,000

Manager should hire 5 workers.

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?

ANSWER:

MRP = P (price product sold at) x MP

MRP = 3,000 x MP

# agents MP MRP

1 20 $60,000

2 17 $51,000

3 15 $45,000

4 12 $36,000

5 8 $24,000

6 4 $12,000

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?

ANSWER:

MRP = w

MRP = P x MP

MRP = 3,000 x 10 = 30,000

Manager should hire 4 agents.

Are these answers correct? Not too sure!

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