Papa Joe\'s Pizza is trying to decide how many workers to hire. It gathers the f

Question

Papa Joe's Pizza is trying to decide how many workers to hire. It gathers the following information: Worker Marginal Marginal Cost to the Benefit to Employer per Employer hour $20 $18 $16 per hour $1 $2 $4 4 $12 $10 $8 $6 $4 $2 $8 $10 $12 $14 $16 $18 5 8 10 A) Using marginal analysis, how many workers should Papa Joe's hire? B) Could Papa Joe's increase their producer surplus if they hire one more or one fewer worker than you determined? Why or why not? Explain your answer in terms of marginal benefit and cost and net benefit.

Explanation / Answer

1) Papa Joe should hire 6 workers because marginal benefit and marginal cost for sixth worker is same.Thus net benefit from 6th worker is zero which maximises the net benefit.

B)if they hire one less or one more worker than net benefit will be lesser. E.g. If Joe hire 7 worker than benefit from 7th worker is 8 whereas the cost from 7th worker is 12. Thus there is net loss of 4 from 7th worker hiring.

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