Pizza Production and Sales Analysis

Study Notes

A pizza shop called "Pizza'R' Us" hires cooks at an hourly wage of $20.
The shop sells a medium pizza for $10 each.
Hiring more cooks increases pizza production, as shown in the table.
The total cost of hiring 3 cooks for 8 hours is 480(480 (480(20/hour x 3 cooks x 8 hours).
The total revenue of selling pizzas with 2 cooks in 8 hours is 560(2cooksx70pizzas/cookx560 (2 cooks x 70 pizzas/cook x 560(2cooksx70pizzas/cookx10/pizza).
The average labor cost per pizza with 4 cooks is $6.
The average benefit per pizza with 2 cooks is $8.
The marginal cost of the 3rd cook, if the shop operates for one hour, is $20.
The marginal benefit of the 3rd cook, if the shop operates for one hour, is $10.
To maximize net benefit, the shop should hire 3 cooks.

Dent'nScratch Used Cars and Trucks employs 3 salesmen: Joe, Larry, and Ralph.
Joe has an absolute advantage in selling cars and Ralph has an absolute advantage in selling trucks.
Larry’s opportunity cost of selling a truck is 1 car not sold.
Joe’s opportunity cost of selling a truck is 4 cars not sold.
Ralph’s opportunity cost of selling a truck is 3 cars not sold.
Joe’s opportunity cost of selling a car is less than Ralph’s, and less than Larry’s.
Larry should specialize in truck sales, and Ralph should specialize in car sales.

Stone, Inc. hires workers to stitch jeans in a competitive labor market.
The cost to make a pair of jeans is 5,andtheysellfor5, and they sell for 5,andtheysellfor35 each.
The weekly output of jeans varies based on the number of workers hired.
If the market wage is $250 per week, Stone should hire 4 workers, producing 72 pairs of jeans.
A weekly minimum wage of $230 would reduce the number of workers hired to 3, producing 60 pairs of jeans.
A weekly minimum wage of $400 would result in Stone hiring no workers.

Increasing drug interdiction efforts at borders can decrease the available supply of heroin.
This could lead to an increase in drug-related crime due to rising prices for heroin.

Farmer Jane is an expected-utility maximizer and must choose between planting potatoes or strawberries, facing a 50% chance of drought.
If she plants potatoes, her payoff is 5000withnormalrainand5000 with normal rain and 5000withnormalrainand40,000 with drought.
If she plants strawberries, her payoff is 20,000withnormalrainand20,000 with normal rain and 20,000withnormalrainand12,000 with drought.
If she can only plant one crop, she should plant potatoes due to higher expected utility.
If she can plant half of each crop, she should plant half potatoes and half strawberries.

Anna and Stan each have a risky asset, X and Y respectively.
Both assets offer a 50% chance of 100anda50100 and a 50% chance of 100anda500.
They can form a mutual fund by pooling their assets.
By combining their resources, they can reduce the risk and increase their expected utility.

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