The manager of All City Realtors wants to hire some real estate agents to specialize in selling housing units acquired by the Resolution Trust Corporation (RTC) in its attempt to bail out the savings and loan industry. The commission paid by the RTC to the company to sell these homes is a flat rate of $2,000 per unit sold, rather than 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 (# of Additional Units Sold per Year) 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. 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 wage rate falls to $18,000 per year, how many agents should the manager hire?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question

Q. The manager of All City Realtors wants to hire some real estate agents to specialize in selling housing units acquired by the Resolution Trust Corporation (RTC) in its attempt to bail out the savings and loan industry. The commission paid by the RTC to the company to sell these homes is a flat rate of $2,000 per unit sold, rather than 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 (# of Additional Units Sold per Year) 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.

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

d. Suppose RTC raises its commission to $3000 per unit sold. Now what is the marginal revenue product for each real estate agent employed?

e. Now that the RTC is paying $3000 per unit sold, how many agents should the manager hire if the new wage rate is $30,000?

Expert Solution
steps

Step by step

Solved in 4 steps with 1 images

Blurred answer
Knowledge Booster
Cost Function
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education