Question

Sam's Performance Pizza is a small restaurant in San Diego that sells gluten-free pizzas. Sam's very tiny kitchen has barely enough room for the two ovens in which his workers bake the pizzas. Sam signed a lease obligating him to pay the rent for the two ovens for the next year. Because of this, and because Sam's kitchen cannot fit more than two ovens, Sam cannot change the number of ovens he uses in his production of pizzas in the short run. However, Sam's decision regarding how many workers to use can vary from week to week because his workers tend to be students. Each Monday, Sam lets them know how many workers he needs for each day of the week. In the short run, these workers are inputs, and the ovens are inputs. Sam'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 (Number of workers) Output (Pizzas) Marginal Product of Labor (Pizzas) 140 150

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	50	50
2	90	40
3	120	30
4	140	20
5	150	10

Marginal product of labor = (change in output / change in labor)

Production function. Quantity of Output (Pizzas) 56 2 3 labor (number of workers)

labor	Output	Fixed cost	Variable cost	Total cost
0	0	30	0	30
1	50	30	30	60
2	90	30	60	90
3	120	30	90	120
4	140	30	120	150
5	150	30	150	180

Fixed cost =$30 and it remains same at each level of output.

Variable cost = Wage rate * No. of labor

Variable cost = $30 * No of labor

Total Cost = Fixed cost + Variable cost.

Total cost ($ 0 20 40 120 140 160 60 80 100 Quantity of output (Pizzas) Total cost

The law of diminishing marginal product of labor implies an increase in total output at a decreasing rate as the number of labor increases.

Answer; Option (C)