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net marginal revenue product

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Will Truman and Associates, LLC is a successful Manhattan based law firm. Worker productivity at the firm is measured in billable hours, which vary between partners and associates.

Partner time is billed to clients at a rate of 250 per hour whereas associates time is billed at a rate of 125 per hour. On average each partner generates 25 billable hours per 40 hour work week with 15 hours spent on promotion, administrative and supervisory responsibilities. Associates generate an average of 35 billable hours per 40 hour workweek and spend 5 hours per week in administrative and training meetings. Variable overhead costs average 50 percent of revenues generated by partners and given supervisory requirements, 60 percent of revenue generates by associates.

A. Calculate the annual 50 workweek net marginal revenue product of partners and associates.
B. If partner earn 175000 and associates earn 70,000 per year does the company have an optimal combination of partners and associates? If not why not? make sure answer explicit and support any recommendations for change

7.9

Answer
a MRPp = 156,250, MRPa=87500
Please help show how this was calculated

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Solution Summary

The net marginal revenue products are determined.

$2.19
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Economics inquiries

Product 7.2 Production function Concepts. Indicate whether each of the following statements is true or false. Explain your answers.
A. Decreasing returns to scale and increasing average costs are indicated when &#61646;Q<1.
B. If the marginal product of capital falls as capital usage grows, the returns to capital are decreasing.
C. L-shaped isoquants describe production systems in which inputs are perfect substitutes.
D. Marginal revenue product measures the profit earned through expanding input usage.
E. The marginal rate of technical substitution will be affected by a given percentage increase in the marginal productivity of all inputs.

Problem 7.3 Compensation Policy. "Pay for performance" means that employee compensation closely reflects the amount of value derived from each employee's effort. In economic terms, the value derived from employee effort is measured by net marginal revenue product. It is the amount of profit generated by the employee, before accounting for employment costs. Holding all else equal, indicate whether each of the following factors would be responsible for increasing or decreasing the amount of money available for employee merit-based pay.
A. Government mandates for employer-provided health insurance
B. Rising productivity due to better worker training
C. Rising employer sales due to falling imports.
D. Falling prices for industry output
E. Rising prevalence of uniform employee stock options

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