PLEASE READ CAREFULLY AND ANSWER ALL THE QUESTIONS! SHOW ALL YOUR CALCULATIONS CLEARLY! ANSWERS MUST BE…
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Question “PLEASE READ CAREFULLY AND ANSWER ALL THE QUESTIONS! SHOW ALL YOUR CALCULATIONS CLEARLY! ANSWERS MUST BE…”
PLEASE READ CAREFULLY AND ANSWER ALL THE QUESTIONS! SHOW ALL
YOUR CALCULATIONS CLEARLY! ANSWERS MUST BE CLEAR TO READ!
THANKS!
Answer
Hubert can’t change the number ovens used in pizza production in the short-term. He can, however, change the number and type of workers he employs.
Short-term, inputs cannot be modified as production changes occur are called fixed inputs while inputs that can change as production changes happen are called variable inputs.
So,
These workers are variables inputs and the ovens fixed outputs in the short-term.
The following table lists the MPL for each worker.
Total 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 |
The production function is as follows –
Workers are paid $30/day and fixed costs $30/day.
The following is the total cost schedule.
Total number of workers |
Output |
Fixed price |
Variable costs |
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 |
The following figure illustrates the total cost curve.
As the labor force grows, so does marginal product.
This is due to the law of diminishing marginal return.
The law of diminishing marginal return is reflected in the form of the production function.
The given statement is True.
Conclusion
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