Question

Jake's Performance Pizza is a small restaurant in New York City that sells gluten-free pizzas. Jake's very tiny kitchen has barely enough room for the four ovens in which his workers bake the pizzas. Jake signed a lease obligating him to pay the rent for the four ovens for the next year. Because of this, and because Jake's kitchen cannot fit more than four ovens, Jake cannot change the number of ovens he uses in his production of pizzas in the short run. However, Jake's decision regarding how many workers to use can vary from week to week because his workers tend to be students. Each Monday, Jake 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 re inputs Jake'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. Output Marginal Product of Laboir Number of Workers (Pizzas) (Pizzas) 10i 130 150 160 4

Answer 1

The difference between the fixed and the variable factors are the fixed factors remain fixed during the production process and the variable factor varies with the output. In this case the workers are variable inputs and the ovens are fixed input.

The marginal product of the labor is the addition made to the total product when an additional unit of the labour is employed. And this can be calculated by dividing the change in total output divided by the change in the labour employed.

MP

OR by using the formula  $=TP_{n}-TP_{n-1}$

The production function and the marginal product is given above, the production function shows the relationship between the quantity produced and the number of labour employed.

The total cost is the sum of both the fixed as well as the variable cost, we should add both the variable and the fixed cost to get the total cost.

Total cost fixed cost variable cost 20 20 20 20 20 20 20 30 60 90 120 150 100 80 110 140 170 150 160 Total cost 180 160 140 120 100 80 60 40 20 Total cost 50 100 150 200

The shape of the production function shows the law of diminishing marginal returns and not increasing marginal returns.

Ans: FALSE.