Answer to Question #294635 in Microeconomics for queen

Question

Eric runs a bicycle repair business and employs a single worker, Vanessa. He charges $6 to repair a flat tire. Vanessa's marginal product is given by 𝑇=1.5−𝐿

100 where 𝐿

L is the number of hours she works in a day and 𝑇

T is the number of additional tires that she repairs.

Suppose Eric currently pays Vanessa $8.25 per hour. How many hours changing tires, per day, should Eric have Vanessa work?  

Answer 1

Total output produced is maximum at the point where, the marginal product is equal to zero.

In this case, Eric wishes for Vanessa to work at maximum potential to maximize his profits.

Equating the value of marginal product to zero we get;

$1.5 -L=0$

substituting we have the value of L as;

$L=1.5$

$\therefore$ Eric wishes Vanessa to work 1.5 hours a day.