You own a pizza shop called "Pizzas'R' Us". Currently you are paying your cooks an hourly wage of $20. You sell a medium pizza for $10. By hiring more cooks, you can increase your pizza production as shown in the following table. $$\begin{array} { | l | l | }
\hline \begin{array} { l }
\text { Number of } \
\text { cooks }
\end{array} & \begin{array} { l }
\text { Total production of } \
\text { pizzas each hour }
\end{array} \
\hline 0 & 0 \
\hline 1 & 4 \
\hline 2 & 7 \
\hline 3 & 9 \
\hline 4 & 10 \
\hline 5 & 10 \
\hline
\end{array}$$ How many cooks should you hire to maximize your net benefit?

Question

You own a pizza shop called "Pizzas'R' Us". Currently you are paying your cooks an hourly wage of $20. You sell a medium pizza for $10. By hiring more cooks, you can increase your pizza production as shown in the following table. $$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Number of } \
\text { cooks }
\end{array} & \begin{array} { l } 
\text { Total production of } \
\text { pizzas each hour }
\end{array} \
\hline 0 & 0 \
\hline 1 & 4 \
\hline 2 & 7 \
\hline 3 & 9 \
\hline 4 & 10 \
\hline 5 & 10 \
\hline
\end{array}$$ How many cooks should you hire to maximize your net benefit?

Quizplus · Accepted Answer

Hiring 3 cooks maximizes net benefit. The marginal cost of hiring each additional cook is $20, and the marginal revenue from additional pizzas decreases after the third cook. Hiring 3 cooks results in 9 pizzas, generating $90 in revenue, while the cost is $60, resulting in a net benefit of $30.

You Own a Pizza Shop Called "Pizzas'R' Us How Many Cooks Should You Hire to Maximize Your Net