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Homework answers / question archive / Pizza Work hours M workers or the change in Work hours MC(at a wage of $20/hour), inputs at $4 MPL amount that one worker would produce 1 0
| Pizza | Work hours | M workers or the change in Work hours | MC(at a wage of $20/hour), inputs at $4 | MPL amount that one worker would produce |
| 1 | 0.3 | |||
| 2 | 0.7 | |||
| 3 | 1.2 | |||
| 4 | 1.8 | |||
| 5 | 2.5 | |||
| 6 | 3.3 | |||
| 7 | 4.2 | |||
| 8 | 5.2 | |||
| 9 | 6.3 | |||
| 10 | 7.5 |
Demand is strong and Antonio's can sell more pizza
1. In the short-run, how can they increase production?
2. Fill in the table. After the first pizza, what happens to the time needed for each additional pizza? Why? What happens to the marginal product of labor? What happens to marginal costs?
3. If ingredients are $4 per pizza and wage $20, how many pizzas will Antonio's offer to sell at $12 pizza? How many at $20?
1) Antonio can increase production by employing more working hours to produce more pizzas.
2)
| L(work hours) | TP(Pizza) | Change in work hours | TC(input cost +Wage) | Marginal cost | MP_L | TR | MR | MRP(P=$12) | MRP(P=$20) |
|---|---|---|---|---|---|---|---|---|---|
| 0.3 | 1 | 0.3 | 10 | 10 | - | 12 | - | - | - |
| 0.7 | 2 | 0.4 | 22 | 12 | 2.5 | 24 | 12 | 30 | 50 |
| 1.2 | 3 | 0.5 | 36 | 14 | 2 | 36 | 12 | 24 | 40 |
| 1.8 | 4 | 0.6 | 52 | 16 | 1.67 | 48 | 12 | 20 | 33.33 |
| 2.5 | 5 | 0.7 | 70 | 18 | 1.428 | 60 | 12 | 17.14 | 28.57 |
| 3.3 | 6 | 0.8 | 90 | 20 | 1.25 | 72 | 12 | 15 | 25 |
| 4.2 | 7 | 0.9 | 112 | 22 | 1.11 | 84 | 12 | 13.33 | 22.22 |
| 5.2 | 8 | 1 | 136 | 24 | 1 | 96 | 12 | 12 | 20 |
| 6.3 | 9 | 1.1 | 162 | 26 | 0.909 | 108 | 12 | 10.90 | 18.18 |
| 7.5 | 10 | 1.2 | 190 | 28 | 0.83 | 120 | 12 | 10 | 16.67 |
After the first pizza, the time needed for each additional pizza increases which might be the case because of law of diminishing returns. Marginal product for labor decreases with increase in labor while the marginal cost increases with increase in labor.
3) We can see from the table that when price of pizza is $12, around 5 pizzas will be sold. It is the level at which the marginal cost equals the marginal revenue product of labor.
Also when the price increases to $20, now the firm will make 7 pizzas. Beyond this at p=$20, the increase in MRP is less than the increase in the marginal cost.
