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Economics

BMW produces its X series of SUVs and Crossovers in a factory in Spartanburg, SC. The plant is planning to produce a new line of vehicles and wants to determine how many assembly line workers it needs to hire for its new production line. The plant will pay each worker hired $42,000 a year ($3,500 per month). The plant managers predict the monthly number of vehicles produced will follow this equation: #produced = 20*X - X2 where X is the number of employees hired. The company will make a profit of $15,000 per vehicle produced before accounting for labor costs. Provide a well labeled graph of the marginal cost and marginal benefit of hiring different numbers of employees. Clearly indicate the marginal cost and marginal benefit lines and mark the optimal number of employees. The above analysis assumes search costs are zero. Now assume qualified employees are hard to find and hire and search costs increase with each subsequent hire (i.e. it's easier to find the first employee than it is to find the second). Explain the implications for the graph in part d) related to marginal cost, marginal benefit, and optimal number of employees hired.