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 selling additional pizzas should be compared. Hiring 3 cooks results in 9 pizzas, generating $90 in revenue, with $60 in wages, yielding a net benefit of $30. Hiring more cooks does not increase production enough to cover the additional wage cost.

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