Question

Poornima's Performance Pizza is a small restaurant in Denver that sells gluten-free pizzas. Poornima's very tiny kitchen has barely enough room for the two ovens in which her workers bake the pizzas

 2. Inputs and outputs

 Poornima's Performance Pizza is a small restaurant in Denver that sells gluten-free pizzas. Poornima's very tiny kitchen has barely enough room for the two ovens in which her workers bake the pizzas. Poornima signed a lease obligating her to pay the rent for the two ovens for the next year. Because of this, and because Poornima's kitchen cannot fit more than two ovens, Poornima cannot change the number of ovens she uses in her production of pizzas in the short run.

 However, Poornima's decision regarding how many workers to use can vary from week to week because her workers tend to be students. Each Monday, Poornima lets them know how many workers she needs for each day of the week. In the short run, these workers are _______  inputs, and the ovens are _______  inputs.


 Poornima's daily production schedule is presented in the following table.


 Fill in the blanks to complete the Marginal Product of Labor column for each worker.

image.png

 On the following graph, plot Poornima's production function using the green points (triangle symbol).

 Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. Hint: Be sure to plot the first point at (0, 0).

image.png

 Suppose that labor is Poornima's only variable cost and that she has a fixed cost of $30 per day and pays each of her workers $30 per day.

 Use the orange points (square symbol) to plot Poornima's total cost curve on the following graph using the quantities from the preceding table.

image.png

 The law of diminishing marginal product of labor is demonstrated by which of the following? 

  • Total output declines as you increase the quantity of labor.

  • Total output increases at a decreasing rate as you increase the quantity of labor. 

  • Total output increases only when you increase both labor and ovens.


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Answer #1

Workers = variable inputs and Ovens = Fixed inputs

WORKERS OUTPUT MP FC VC TC
0 0 30 0 30
1 50 50 30 30 60
2 90 40 30 60 90
3 120 30 30 90 120
4 140 20 30 120 150
5 150 10 30 150 180

- Total output increases at a decreasing rate as you increase the quantity of labor

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