The manager of All City Realtors wants to hire some real estate agents to specia

Question

The manager of All City Realtors wants to hire some real estate agents to specialize in selling housing units acquired by the Resolution Trust Corporation (RTC) in its attempt to bail out the savings and loan industry. The commission paid by the RTC to the company to sell these homes is a flat rate of $2,000 per unit sold, rather than the customary commission that is based on the sale price of a home. The manager estimates the following marginal product schedule for real estate agents dealing in government- owned housing:

Marginal product (MP)

Number of real         (number of additional                     Marginal

estate agents               units sold per year)                           revenue product (MRP)

30                                                        _______

26                                                        _______

21                                                        _______

15                                                        _______

8                                                          _______

2                                                          _______

1 - Construct the marginal revenue product (MRP) schedule by filling in the blanks in the table.

2 - If the manager of All City Realtors must pay a wage rate of $30,000 per year to get agents who will specialize in selling RTC housing, how many agents should the manager hire? Why?

3 - If the wage rate falls to $14,000 per year, how many agents should the manager hire?

Explanation / Answer

Ans

A 30(2000)=60000

52000

42000

30000

16000

4000

B 4 because here MRP=15000(2000)=30000 is equal to cost

C5 because now costs of 5th can also be covered

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