William is the owner of a small pizza shop and is thinking of increasing products and lowering costs

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Problem 1:
William is the owner of a small pizza shop and is thinking of increasing products
and lowering costs. William’s pizza shop owns four ovens and the cost of the four
ovens is $1,000. Each worker is paid $500 per week.
Workers employed
Qty of pizzas produced per week
1

0

2

75

3

180

4

360

5

600

6

900

7

1140

8

1260

9

1360

Show all of your calculations and processes. Describe your answer for each question
in complete sentences, whenever it is necessary.
Which inputs are fixed and which are variable in the production function of
William’s pizza shop? Over what ranges do there appear to be increasing, constant,
and/or diminishing returns to the number of workers employed?
What number of workers appears to be most efficient in terms of pizza product per
worker?
What number of workers appears to minimize the marginal cost of pizza production
assuming that each pizza worker is paid $500 per week?
Why would marginal productivity decline when you hire more workers in the short
run after a certain level?
How would expanding the business affect the economies of scale? When would you
have constant returns to scale or diseconomies of scale? Describe your answer.

    • 7 years ago
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