Question

3. The relationship between marginal physical product and marginal cost Kenji's Burrito Stand is a small restaurant that sells burritos. For Kenji, stoves are a fixed input and workers are variable inputs. Assume that laboris Kenji's only variable cost. Kenji has a fixed cost of $80 per day and pays each of his workers $120 per day. Kenji's total product schedule and total cost at each level of labor are presented in the following table. Fill in the blanks to complete the Marginal Physical Product of Labor column for each worker and the Marginal Cost column at each level of labor. (Hint: Marginal cost is the change in total cost divided by the change in the quantity of output. You can calculate it here by dividing the increase in total cost from hiring one more worker by the marginal physical product from hiring one more worker.) Quantity of Labor (Workers) Quantity of Output (Burritos per day) Marginal Physical Product of Labor (Burritos per day) Marginal Cost (Dollars per burrito) Total Cost (Dollars per day) $80 $200 40 100 140 $320 $440 $560 $680 160 175 When hiring 3 or more workers, Kenji's Burrito Stand faces marginal returns to labor. Over the range of workers for which the marginal product of labor is increasing, Kenji's Burrito Stand faces marginal cost.

Answer 1

Answer:

Quantity	Quantity of output	Marginal Physical Product of labor	Total Cost	Marginal Cost
0	0	-	80
1	40	40-0=40	200	[200-80]/[40-0] = 120/40 = 3
2	100	100-40=60	320	[320-200]/[100-40] = 120 / 60 = 2
3	140	140-100=40	440	[440-320] / [140-100] = 120 / 40 = 3
4	160	160-140=20	560	[560 – 440]/[160-140] = 120/20 =6
5	175	175-160=15	680	[680-560]/[175-160] = 120 / 15 = 8

MPPL = Change in quantity of output / change in quantity of labor

Marginal cost = Change in total cost / Change in quantity of output

When hiring 3 or more workers, Kenji Burrito Stand faces decreasing marginal returns to labor

Over the range of workers for which the marginal product of labor is decreasing, Kenjis Burrito stand faces increasing marginal cost.