consultant for Woods Restaurants
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You are a consultant for Woods Restaurants.
At the deli counter, during the busy lunch hour (12-1 pm), the amount of sandwiches (Q) that can be made is determined by the number of workers (L). Suppose each worker makes $6 per hour and sandwiches sell for $4. Further, you have observed the number of workers and quantity of sandwiches over several days and have estimated the following production function:
Q = 4L - 0.25L2
a. How many workers should Woods employ during the lunch hour to maximize profits?
(note?consider the value of the marginal product of labor and the marginal revenue product are the same)
b. Compute the maximum profit at Woods.
(note?consider that profit involves Total Revenue and Total Costs)
c. Compute the marginal revenue product of the sixth worker. Explain why it is or is not profit maximizing to hire a sixth worker.
d. Suppose instead that Woods wants to keep the lines as short as possible by maximizing production. How many workers should Woods employ during the lunch hour?
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Education
- BE, Bangalore University, India
- MS, University of Wisconsin-Madison
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