Question

Kyoko's Performance Pizza is a small restaurant in Dallas that sells gluten-free pizzas. Kyoko's very tiny...

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

However, Kyoko's decision regarding how many workers to use can vary from week to week because her workers tend to be students. Each Monday, Kyoko 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.

Kyoko'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.

Labor

Output

Marginal Product of Labor

(Number of workers)

(Pizzas)

(Pizzas)

0 0
1 100
2 180
3 240
4 280
5 300

On the following graph, plot Kyoko'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).

Production Function0123453002702402101801501209060300QUANTITY OF OUTPUT (Pizzas)LABOR (Number of workers)5, 300

Suppose that labor is Kyoko's only variable cost and that she has a fixed cost of $50 per day and pays each of her workers $40 per day.

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

Total Cost03060901201501802102402703003002702402101801501209060300TOTAL COST (Dollars)QUANTITY OF OUTPUT (Pizzas)

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

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.

Total output declines as you increase the quantity of labor.

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Answer #1

In the short run, these workers are variable inputs, and the ovens are fixed inputs.

Labor Output Marginal product of labor
0 0 ------
1 100 100
2 180 80
3 240 60
4 280 40
5 300 20

The marginal product of labor = (Change in Output / Change in Labor)

+ Production Function + + + QUANTITY OF OUTPUT (Pizzas) + + + + LABOR HIRED (Number of workers)

When the fixed cost is $50 and each labor costs $40

Number of workers Output Fixed cost Variable cost Total cost(FC+VC)
0 0 50 0 50
1 100 50 40 90
2 180 50 80 130
3 240 50 120 170
4 280 50 160 210
5 300 50 200 250

Total Cost TOTAL COST (Dollars) 0 30 270 300 60 90 120 150 180 210 240 QUANTITY OF OUTPUT (Pizzas)

The law of diminishing marginal product of labor is demonstrated by increase in total output at a decreasing rate as you increase the quantity of labor.

Answer: Option (A)

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