A large architectural firm has just landed a contract to build a hospital. Nine architects currently work 40 hours per week in this firm, and all are available to work full-time on this project. The managers estimate that they need 400 architect-hours per week for 20 weeks to complete this project. Architects earn $500 per 40-hour week. Suppose that there is a fixed cost of hiring an architect of $2,000. (This cost reflects the advertising costs, interviewing costs, and so forth.) The firm's current architects are willing to work overtime to complete this project if they receive 1.5 times their usual wage rate for any hours in excess of 40 hours per week. In this situation, the total overtime wages the managers would pay for the project will be $ 18,000 Alternatively, the firm can handle this project by hiring new workers (for 20 weeks only) and having all architects work 40 hours per week. The number of new architects the firm would need to hire is 1. Comparing the costs suggests that the managers should hire new architects for their firm

A large architectural firm has just landed a contract to build a hospital. Nine architects currently work 40 hours per week in this firm, and all are available to work full-time on this project. The managers estimate that they need 400 architect-hours per week for 20 weeks to complete this project. Architects earn $500 per 40-hour week. Suppose that there is a fixed cost of hiring an architect of $2,000. (This cost reflects the advertising costs, interviewing costs, and so forth.) The firm's current architects are willing to work overtime to complete this project if they receive 1.5 times their usual wage rate for any hours in excess of 40 hours per week. In this situation, the total overtime wages the managers would pay for the project will be $ 18,000 Alternatively, the firm can handle this project by hiring new workers (for 20 weeks only) and having all architects work 40 hours per week. The number of new architects the firm would need to hire is 1. Comparing the costs suggests that the managers should hire new architects for their firm

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter4: Extent (how Much) Decisions

Section: Chapter Questions

Problem 3MC

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