Suppose you are running a small pizza shop and have to figure out how many workers to schedule on a daily basis. Rent costs $150 per day, each pizza contains $4 worth of ingredients, and employees are paid $120 per day. The following table indicates how many pizzas (Q) can be made per day, given the number of employees scheduled to work that day, and you firm's marginal benefit (MB) curve for those pizzas: Employees Q MB 0 0 $30 1 20 $25 2 50 $20 3 70 $18 4 85 $17
Suppose you are running a small pizza shop and have to figure out how many workers to schedule on a daily basis. Rent costs $150 per day, each pizza contains $4 worth of ingredients, and employees are paid $120 per day. The following table indicates how many pizzas (Q) can be made per day, given the number of employees scheduled to work that day, and you firm's marginal benefit (MB) curve for those pizzas:
Employees Q MB
0 0 $30
1 20 $25
2 50 $20
3 70 $18
4 85 $17
5 97 $16
6 107 $15
7 115 $14
a) What is the average fixed cost (AFC) of producing 70 pizzas?
b) What is the
c) What is the marginal cost (MC) of the 97th pizza?
d) How many employees should you hire if you want to minimize your
e) What is the marginal revenue (MR) of the 70th pizza?
f) If you are trying to maximize profit, how many pizzas (q) should you make per day?
g) How much should you charge (P) for your pizzas?
h) What will your daily economic profit (ππ) be?
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