Question
You are the operations manager of WidgetWorks Inc, a company that produces widgets. Because of an increase in demand for widgets, you need to hire
You are the operations manager of WidgetWorks Inc, a company that produces widgets. Because of an increase in demand for widgets, you need to hire more labor to meet your increased production schedule. When hiring more labor, you can either (a) hire more employees or (b) require your existing workforce to work more hours. The marginal expense of hiring another worker is $150 and the added output associated with an added worker, holding capital and average hours per worker constant, is 120. The marginal expense of hiring current workers for an extra hour is $10 and the added output associated with increasing average hours per worker, holding capital and the number of employees constant, is 7. If you are interested in maximizing profit, what should you do: hire more workers or require your existing workforce to work more hours? Why?
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