Inputs and outputs Carlos's Performance Pizza is a small restaurant in Philadelphia that sells gluten-free pizzas. Carlos's very tiny kitchen has barely enough room for the two ovens in which his workers bake the pizzas. Carlos signed a lease obligating him to pay the rent for the two ovens for the next year. Because of this, and because Carlos's kitchen cannot fit more than two ovens, Carlos cannot change the number of ovens he uses in his production of pizzas in the short run.
However, Carlos's decision regarding how many workers to use can vary from week to week because his workers tend to be students. Each Monday, Carlos lets them know how many workers he needs for each day of the week. In the short run, the wages paid to these workers are costs, and the payments to lease the ovens are costs.
Carlos's daily production schedule is presented in the following table.
Fill in the blanks to complete the Marginal Physical Product of Labor column for each worker.
Number of Workers
Total Physical Product
Marginal Physical Product of Labor
(Pizzas) (Pizzas)
0 0
1 100
2 180
3 240
4 280
5 300
On the following graph, plot Carlos's total physical product (TPP) curve, sometimes called a 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).
TPP01234530027024021018015012090603 00TOTAL OUTPUT (Pizzas)LABOR HIRED (Number of workers)
Suppose that labor is Carlos's only variable cost and that he has a fixed cost of $50 per day and pays each of his workers $40 per day.
Use the orange points (square symbol) to plot Carlos's total cost curve on the following graph using the quantities from the preceding table.
Total Cost0306090120150180210240270300300 2702402101801501209060300TOTAL COST (Dollars)QUANTITY OF OUTPUT (Pizzas)
The "law" of diminishing returns is demonstrated by which of the following?
Total output declines as you increase the quantity of labor.
Total output increases at a decreasing rate as you increase the quantity of labor.
Total output increases only when you increase both labor and ovens.