A manager in charge of new product development can hire engineers and market res

Question

A manager in charge of new product development can hire engineers and market researchers. The annual salary of an engineer is $40,000, while a market researcher receives $20,000. The marginal contributions of engineers and market researchers are Engineers Market Researchers Additional Additional Worker Worker New Products 50 40 30 20 10 New Products 20 15 10 st st nd nd rd rd th th Based on the above information, how should the manager with an annual budget of $160,000, allocate this budget in order to maximize the number ot new products developed? O Hire 2 engineers and 1 market researcher O Hire 3 engineers and 2 market researchers Hire 4 engineers and 3 market researchers O Hire 4 engineers and 1 market researcher

Explanation / Answer

In order to maximize the number of new products developed, the manager should hire 3 engineers and 2 market researcher.

It is so because the first 3 engineers produces the additional new product more than 20,000. But the 4th engineer produces only 20 new additional product which could be produce by the 1st market researcher also at half annual salary ( as the annual salary of engineer is 40,000 while that of market researcher is 20,000).

So it will hire 3 engineers and after hired 3 engineers manager is only left with a budget of $160,000 - $40,000*3 = $40,000.

So in this he could hire only 2 market researcher.

That's why manager will hire 3 engineers and 2 market researcher.

So option b) is correct

Option a) is incorrect because the cost of 2 engineers and 1 market researcher is only ( 40,000*2+ 20,000 = ) $100,000 which is less than $160,000, so here manager doe not maximize the number of new products developed with the given budget.

Option c) is not affordable for the manager as his budget is only $160,000.

Option d) is incorrect because, the 4th engineer produces same as 1st market researcher so manager never hie the 4th engineer, also it is ot of the budget of the manager to hire 4 engineers and 1 market researcher.

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