Question

Bongiorno’s is a pizzeria operating in a competitive market. Its short-run production function is shown below. Bongiorno’s weekly cost of capital (plant) is $750, its cost of labor is $320 per worker, and its cost of the pizza ingredients is $6 per pie. The going market price of pizza is $13 per pie.

Workers (L) Pizzas (Q) 132 200 255 303 347 387 424

A) In the scenario above, when Bongiorno’s hires a fourth worker, what is the marginal product of labor?

B) In the scenario above, if Bongiorno’s hires a fifth worker, what will be the value of the marginal product of labor?

C) In the scenario above, how many workers should Bongiorno’s hire?

D) In the scenario above, when Bongiorno’s produces 255 pizzas, what is its total variable cost ($)?

E) In the scenario above, when Bongiorno’s produces 347 pizzas, what is its average total cost ($)?

F) In the scenario above, suppose Bongiorno’s temporarily shuts down and does not produce any pizza. What is its total cost ($)?

G) In the scenario above, what price should Bongiorno’s charge to maximize its profit ($ per pizza)?

H) In the scenario above, which of the following output levels will bring Bongiorno’s the highest profit?

(a) 132 pizzas (b) 200 pizzas (c) 255 pizzas (d) 303 pizzas (e) 347 pizzas (f) 387 pizzas

I) In the scenario above, what is the highest profit Bongiorno’s can achieve ($)?

Answer 1

Workers	Pizzas	MP	VMPL	TVC	TFC	TC	ATC
1	132	132	1716	1112	750	1862	14.11
2	200	68	884	1840	750	2590	12.95
3	255	55	715	2490	750	3240	12.71
4	303	48	624	3098	750	3848	12.70
5	347	44	572	3682	750	4432	12.77
6	387	40	520	4242	750	4992	12.90
7	424	37	481	4784	750	5534	13.05

MP = change in output

VMPL = MP*P

TVC=(320*Workers)+(6*Pizzas)

TFC=750

TC=TVC+TFC

ATC=TC/Q

A) MP = 48

B) VMPL = 572

C) It should hire where VMPL is equal to or greater than the wage of the worker which is 320 so it should hire 7 workers

D) TVC = 2490

E) ATC = 12.77

F) TC = fixed cost = 750

As per HOMEWORKLIB RULES, more than four parts are answered