Question

PLEASE READ CAREFULLY AND ANSWER ALL THE QUESTIONS! SHOW ALL YOUR CALCULATIONS CLEARLY! ANSWERS MUST BE CLEAR TO READ! THANKS!

Answer 1

It has been stated that, in short-run, Hubert cannot change the number of ovens he uses in production of pizza. However, he can change the number of workers he uses.

In short-run, inputs that cannot be changed as production changes are called fixed inputs and inputs that can be changed as production changes are called variable inputs.

So,

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

Following table shows the MPL of each worker -

Number of workers	Output	MPL
0	0	-
1	50	(50 - 0) 50
2	90	(90 - 50) 40
3	120	(120 - 90) 30
4	140	(140 - 120) 20
5	150	(150 - 140) 10

Following is the production function -

It has been stated that, in short-run, Hubert cannot change the number of ovens he uses in production of pizza. However, he can change the number of workers he uses. In short-run, inputs that cannot be changed as production changes are called fixed inputs and inputs that can be changed as production changes are called variable inputs. So In short-run, these workers are�variable�inputs, and the ovens are�fixed�inputs. Following table shows the MPL of each worker - Each worker is paid $30 per day and fixed costs is $30 per day. Following is the total cost schedule - Marginal product of labor is declining as the number of workers is increasing. This reflects the law of diminishing marginal returns. So, the shape of the production function reflects the law of diminishing marginal returns.

Each worker is paid $30 per day and fixed costs is $30 per day.

Following is the total cost schedule -

Number of workers	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

Following figure shows the total cost curve -

Marginal product of labor is declining as the number of workers is increasing.

This reflects the law of diminishing marginal returns.

So, the shape of the production function reflects the law of diminishing marginal returns.

Thus, the given statement is True.