Are these accurate?
2)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?
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?
Let's analyze these questions step by step:
b) To determine how many agents the manager should hire when the wage rate is $32,000 per year, we need to find the number of agents where the Wage Rate (WR) is equal to or slightly less than the Marginal Revenue Product (MRP). Looking at the MRP table, we can see that when the wage rate is $32,000, the MRP of the 4th agent is $24,000. Therefore, the manager should hire 4 agents because the MRP of the 5th agent ($16,000) is lower than the wage rate.
c) If the wage rate falls to $18,000 per year, we need to find the number of agents where WR is equal to or slightly less than MRP. In this case, the MRP of the 3rd agent is $30,000, which is higher than the wage rate. So the manager should hire 3 agents.
d) If RTC raises its commission to $3,000 per unit sold, we need to recalculate the MRP for each real estate agent by multiplying the new commission rate by their Marginal Product (MP). Using the new commission rate, the revised MRP table would be as follows:
# agents MP MRP @ $3,000
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 RTC is paying $3,000 per unit sold, the manager needs to determine how many agents to hire when the wage rate is $30,000. Looking at the MRP table, we can see that the MRP of the 4th agent is $36,000, which is higher than the wage rate. So the manager should hire 4 agents.
I hope this helps! Let me know if you have any further questions.
To answer these questions, you need to understand the concept of marginal revenue product (MRP) and how it relates to the wage rate and the number of agents hired. Here's how you can approach each question:
a) To construct the MRP schedule, you need to multiply the marginal product (MP) by the price of the product sold. In this case, the price is $2,000 per unit. So, for each number of agents, multiply the MP by $2,000 to calculate the MRP.
# agents | MP | MRP
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) To determine how many agents the manager should hire at a wage rate of $32,000 per year, compare the MRP with the wage rate. The manager should hire agents until the MRP is equal to or greater than the wage rate. In this case, the manager should hire 3 agents because their MRP of $30,000 is greater than the wage rate.
c) If the wage rate falls to $18,000 per year, you need to recalculate the MRP and determine how many agents should be hired. Following the same process as in question a, calculate the MRP at the new wage rate of $18,000 per year and find the number of agents where the MRP is equal to or greater than the wage rate.
# agents | MP | MRP
1 | 20 | $36,000
2 | 17 | $30,600
3 | 15 | $27,000
4 | 12 | $21,600
5 | 8 | $14,400
6 | 4 | $7,200
Based on this table, the manager should hire 2 agents because their MRP of $30,600 is greater than the wage rate.
d) When RTC raises its commission to $3,000 per unit sold, the MRP for each real estate agent employed will change. To calculate the new MRP, simply multiply the new commission ($3,000) by the MP for each agent.
# 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 RTC is paying $3,000 per unit sold, you need to determine how many agents the manager should hire at a wage rate of $30,000. Following the same process as in question b, compare the new MRP schedule with the wage rate and hire agents until the MRP is equal to or greater than the wage rate.
Based on the new MRP schedule, the manager should hire 4 agents because their MRP of $36,000 is greater than the wage rate.
b) Optimize where MC=MR, so at $32,000 wage, the firm will hire agent 2 (34000>32000) but not agent 3 (30000<32000).
c) repeat with logic in b
d) repeat steps in a)
e) repeat b with new schedule.