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Marginal Revenue Product of Labor

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Please help with the following problems.

To better serve customers interested in buying cars over the Internet, Smart Motors, hired Nora Jones to respond to customer inquiries, offer price quotes, and wrote orders from leads generated by the company's Web site. During the last year, Jones averaged 1.5 vehicle sales per week. On average, these vehicles sold for a retail price of $25,000 and brought the dealership a profit contribution of $1,000 each.

A. Estimate Jones' annual (50 workweek) marginal revenue product
B. Jones earns a base salary of $60,000/yr, and Smart Motors pays an additional 28% of this base salary in taxes and fringe benefits. Is Jones a profitable employee?

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Solution Summary

This solution helps with labor economics problems. It helps estimate marginal revenue product and determine whether an employee is profitable.

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A. Estimate Jones' annual (50 workweek) marginal revenue product.

Marginal revenue product here would be then number of cars sold multiplied by the profit generated by Jones. ...

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