Activity 2 Assessment 1.

Summer Jobs in the Skateboard Grip Tape Factory

# of Employees 1 2 3 4 5 6

Output # of Rolls of Tape produced per day 20 50 70 85 95 100

Marginal Product

20 30 20 15 10 5

Value of Additional Grip tape rolls produced per day (Marginal Product x $3) $60 90 60 45 30 15

Marginal Labor Cost per day $40 40 40 40 40 40

No, only the fourth applicant will be hired by RAD SPORTS. The company will not hire the fifth applicant because the marginal cost of hiring her would exceed the value of the additional (marginal) product produced if she were to be hired. As the number of workers increases, additional workers have to share equipment and work in more crowded conditions. Eventually, the work place will become crowded that the workers will start getting in each others way. As more and more workers are hired, each additional worker contributes fewer additional Grip tape rolls to total production. This is why it is better not to hire a fifth employee. 2. How Many to Buy? With $75 one may be able to purchase five jeans with the sale price of $15 per pair, but if I were to decide whether to spend all the money, I would not. In the first place, I had the intention of purchasing a single pair of jeans but since there had been a super sale I could spend lesser money buying what I intended to buy. With the extra money perhaps I would purchase an extra pair so as to make the best out of the situation, purchase other items or just plainly keep the money for additional savings. I would not spend the whole $75 because as what I have learned about diminishing marginal utility at some point the satisfaction that I would gain from getting another pair of jeans would not equate to the money that I would surrender in order to attain it.