Question

3

Mitzi has recently opened a donut truck. She is deciding how many employees to hire. Mitzi's donut production table can be found

below.

Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign.

Mitzi's Labor and Production

Answer 1

Mitzi must balance the number of employees to avoid negative returns in Stage 3 and select a production technology that offers the lowest total cost.

Step-by-step explanation:

Mitzi's donut truck business is experiencing typical production stages. At Stage 3, there are too many workers which leads to a decrease in the marginal product of labor, resulting in negative returns. To maximize output and minimize costs, Mitzi needs to evaluate the cost of adding each worker and aim to optimize production in Stage 2 - where output is highest before diminishing returns set in. When considering different production technologies, the one with the lowest total cost should be chosen, often signaling a shift towards more efficient use of machinery over labor.