Question

2. Inputs and outputs Amy's Performance Pizza is a small restaurant in Dallas that sells gluten-free pizzas. Amy's very tiny kitchen has barely enough room for the three ovens in which her workers bake the pizzas. Amy signed a lease obligating her to pay the rent for the three ovens for the next year. Because of this, and because Amy's kitchen cannot fit more than three ovens, Amy cannot change the number of ovens she uses in her production of pizzas in the short run. However, Amy's decision regarding how many workers to use can vary from week to week because her workers tend to be students. Each Monday, inputs, and the ovens Amy lets them know how many workers she needs for each day of the week. In the short run, these workers are are inputs. Amy'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) 1 2 60 100 130 3 5 160 On the following graph, plot Amy's production function using the green points (triangle symbol). Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. Hint: Be sure to plot the first point at (0,0).

Answer 1

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

A variable input is a resource or factor of production which can be changed in the short run by a firm as it seeks to change the quantity of output produced. A fixed input is a resource or factor of production which cannot be changed in the short run by a firm as it seeks to change the quantity of output produced.

The marginal product of labor (MPL) is the change in output that results from employing an added unit of labor.

MPL can be calculated as change in total output/ change in labor units.

Labor	Output	MPL	Total Cost
0	0	0	20+0 =20
1	60	60	20+30(1)= 50
2	100	40	20+30(2)= 80
3	130	30	20+30(3)=110
4	150	20	20+30(4)= 140
5	160	10	20+30(5)= 170

Production function gives the technological relation between quantities of physical inputs and quantities of output of goods. It can derived by plotting output at various levels of labor units.

Total Cost= Fixed Cost + Variable Cost

Here, fixed cost = $20 and variable cost= $30 per worker

Thus Total cost= 20 + 30q where q represents units of labor

2005 PRODUCTION FUNCTION TOTAL 1407 120 에 1 2 3 4 5 Labor - 20 40 60 80 100 120 140 160 180

The law of diminshing marginal product of labor implies: (a) total output decreases at decreasing rate as you increase the quantity of labor.