Dino operates a museum that showcases rare fossils. Recently he has seen an increase in business and is determining whether to hire a new employee. If acting rationally on what should he base his decision

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05-09-2021
Business

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Dino operates a museum that showcases rare fossils. Recently he has seen an increase in business and is determining whether to hire a new employee. If acting rationally on what should he base his decision

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Tundexi Tundexi · Answer 1 · 2021-09-18T08:16:16+02:00

He should based his decision on "marginal revenue generated by the new worker's labor should be greater than the marginal cost of the worker's salary"

Let understand that Marginal Profit is derived from when Marginal Cost is subtracted from Marginal Revenue.

Rationally, since there is an increase in his business activities which has led to higher profit, taking up a new worker will also led to increase in Cost, but a good profit level will be attain because sales continue to increase.

In conclusion, rational decision are based on ability to attain Marginal profit.

Learn more about Marginal Profit here

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