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Evaluating a Hiring Decision at a Consulting Firm
A manager at a consulting firm is considering hiring a 16th consultant. The firm currently employs 15 consultants, each earning $100,000 per year. To attract the 16th consultant, the firm must increase the annual salary to $103,000 for all consultants. The new consultant is expected to generate $120,000 in additional annual revenue. The manager decides to proceed with the hire, reasoning that since the new consultant's revenue ($120,000) is greater than their individual salary ($103,000), the decision will increase the firm's profit.
Critique the manager's reasoning. Is the decision to hire the 16th consultant economically sound from a profit-maximization perspective? Justify your conclusion with calculations.
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CORE Econ
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.6 The firm and its employees - The Economy 2.0 Microeconomics @ CORE Econ
Evaluation in Bloom's Taxonomy
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Psychology
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