Production data for Joe's Pizza Parlor are as follows.For simplicity assume that labor is the only input.Each pizza sells for $5. $\begin{array} { | c | c | }
\hline \text { Number of Workers } & \text { Pizzas Baked Per Day } \
\hline 0 & 0 \
\hline 1 & 10 \
\hline 2 & 18 \
\hline 3 & 24 \
\hline 4 & 30 \
\hline 5 & 32 \
\hline
\end{array}$
How many workers will Joe hire if he must pay each one $35 a day?
A)1
B)2
C)3
D)4

Question

Production data for Joe's Pizza Parlor are as follows.For simplicity assume that labor is the only input.Each pizza sells for $5. $\begin{array} { | c | c | } 
\hline \text { Number of Workers } & \text { Pizzas Baked Per Day } \
\hline 0 & 0 \
\hline 1 & 10 \
\hline 2 & 18 \
\hline 3 & 24 \
\hline 4 & 30 \
\hline 5 & 32 \
\hline
\end{array}$
How many workers will Joe hire if he must pay each one $35 a day?
A)1
B)2
C)3
D)4

Quizplus · Accepted Answer

We can calculate the marginal product of labor (MPL) for each level of labor input by subtracting the previous level of output from the current level of output. For example, the MPL of worker 1 is 10 - 0 = 10 pizzas. The MPL for each level of labor input is as follows:

Worker 1: MPL = 10
Worker 2: MPL = 8
Worker 3: MPL = 6
Worker 4: MPL = 6
Worker 5: MPL = 2

As we can see, the MPL decreases as more workers are hired, indicating diminishing marginal returns. To determine the optimal level of labor input, we need to compare the MPL to the wage rate. Since each worker must be paid $35, Joe should only hire additional workers if their MPL is greater than $35.

Worker 1 has an MPL of 10, which is greater than $35, so Joe should definitely hire at least one worker. Worker 2 has an MPL of 8, which is still greater than $35, so Joe should hire a second worker. However, the MPL of worker 3 and beyond is less than $35, so Joe should not hire any additional workers beyond worker 2. Therefore, the best choice is B) 2 workers.

Production Data for Joe's Pizza Parlor Are as Follows How Many Workers Will Joe Hire If He Must Pay