Question 2

A small factory in Nebraska produces the bottles that hold my essential oil. See the accompanying Excel spreadsheet for data for this question.

2a) The factory has two factory locations within walking distance of each other. They currently employ 20 workers. The annual revenue of each factory changes with how many workers are in the factory (e.g., more workers results in more output, which results in greater revenue). The workers are paid on an annual salary, not hourly or by output, so you can treat their salary as a sunk cost and ignore it for this question.

	Revenue
# of workers	Factory 1	Factory 2
1	$1,000	$775
2	$1,950	$1,550
3	$2,850	$2,325
4	$3,700	$3,100
5	$4,500	$3,875
6	$5,250	$4,650
7	$5,950	$5,425
8	$6,600	$6,200
9	$7,150	$6,975
10	$7,650	$7,750
11	$8,100	$8,525
12	$8,500	$9,300
13	$8,850	$10,075
14	$9,150	$10,850
15	$9,400	$11,625

Given the data , how many workers should they assign to each factory in order to maximize their profit?

2b) A competitors factory has gone on the market for rent (data listed in the Excel as Factory 3). There are no additional workers for you to hire, but you can assign your existing 20 workers differently now across the 3 factories. What is the maximum youd be willing to pay annually to rent the new factory?

	Revenue
# of workers	Factory 3
1	$1,500
2	$2,900
3	$4,200
4	$5,400
5	$6,500
6	$7,600
7	$8,400
8	$9,000
9	$9,550
10	$10,100
11	$10,500
12	$10,900
13	$11,300
14	$11,550
15	$11,600