Table 1 shows monthly information for a mobile-phone repair business. It is deciding whether to keep one repair worker or employ a second worker. Number of ...
Question 1 Report
Table 1 shows monthly information for a mobile-phone repair business. It is deciding whether to keep one repair worker or employ a second worker.
| Number of workers | Repairs per month | Total wage cost, $ |
|---|---|---|
| 1 | 80 | 1800 |
| 2 | 130 | 3600 |
(a) Calculate the additional repairs produced by the second worker. [1]
(b) Calculate the additional wage cost per additional repair. [2]
(c) Explain why the firm should compare this figure with the price it receives per repair. [2]
(d) State one other factor that could affect the firm's decision. [1]
Answer Details
(a) Additional repairs from employing the second worker:
\[130-80=50\text{ repairs per month}\]
The second worker produces 50 additional repairs. [1]
(b) The additional wage cost is:
\[\$3600-\$1800=\$1800\]
Additional wage cost per additional repair:
\[\frac{\$1800}{50}=\$36\text{ per repair}\]
[2]
(c) The price per repair is the revenue the firm receives from each repair. [1] Comparing this revenue with the additional cost of \(\$36\) allows the firm to judge whether the extra repairs cover the extra wage cost and increase profit. [1]
(d) One further factor is demand for repairs. If demand is too low, the extra worker may not have enough repair work to do. Availability of skilled workers, equipment capacity, rent costs and worker productivity are also valid. [1]
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