Patty’s Pizza Parlor has the production function per hour shown in the accompanying table. The hourly wage rate for each worker is $10. Each pizza sells for $2.
Quantity of labor (workers) | Quantity of pizza |
---|---|
0 | 0 |
1 | 9 |
2 | 15 |
3 | 19 |
4 | 22 |
5 | 24 |
Calculate the marginal product of labor for each worker and the value of the marginal product of labor per worker.
Quantity of labor (workers) | Quantity of pizza | MPL (pizzas per worker) | VMPL1 (per worker) (price of pizza = $2) |
---|---|---|---|
0 | 0 | ||
1 | 9 | $ | |
2 | 15 | ||
3 | 19 | ||
4 | 22 | ||
5 | 24 |
This is a modal window.
Beginning of dialog window. Escape will cancel and close the window.
End of dialog window.
This is a modal window. This modal can be closed by pressing the Escape key or activating the close button.
This is a modal window.
Patty’s Pizza Parlor has the production function per hour shown in the accompanying table. The hourly wage rate for each worker is $10. Each pizza sells for $2.
Quantity of labor (workers) | Quantity of pizza | MPL (pizzas per worker) | VMPL1 (per worker) (price of pizza = $2) |
---|---|---|---|
0 | 0 | ||
1 | 9 | 9 | $18 |
2 | 15 | 6 | 12 |
3 | 19 | 4 | 8 |
4 | 22 | 3 | 6 |
5 | 24 | 2 | 4 |
Using the table above, how many workers should Patty employ?
This is a modal window.
Beginning of dialog window. Escape will cancel and close the window.
End of dialog window.
This is a modal window. This modal can be closed by pressing the Escape key or activating the close button.
This is a modal window.
Now the price of pizza increases to $4. Calculate the value of the marginal product of labor per worker, how many workers Patty should employ now.
Quantity of labor (workers) | Quantity of pizza | MPL (pizzas per worker) | VMPL1 (per worker) (price of pizza = $4) |
---|---|---|---|
0 | 0 | ||
1 | 9 | 9 | $ |
2 | 15 | 6 | |
3 | 19 | 4 | |
4 | 22 | 3 | |
5 | 24 | 2 |
How many workers should Patty hire?
This is a modal window.
Beginning of dialog window. Escape will cancel and close the window.
End of dialog window.
This is a modal window. This modal can be closed by pressing the Escape key or activating the close button.
This is a modal window.
Now let’s assume that Patty buys a new high-tech pizza oven that allows her workers to become twice as productive as before. That is, the first worker now produces 18 pizzas per hour instead of 9, and so on.
Calculate the new marginal product of labor and the new value of the marginal product of labor.
Quantity of labor (workers) | Quantity of pizza | MPL (pizzas per worker) | VMPL1 (per worker) (price of pizza = $2) |
---|---|---|---|
0 | 0 | ||
1 | 18 | $ | |
2 | 30 | ||
3 | 38 | ||
4 | 44 | ||
5 | 48 |
This is a modal window.
Beginning of dialog window. Escape will cancel and close the window.
End of dialog window.
This is a modal window. This modal can be closed by pressing the Escape key or activating the close button.
This is a modal window.
Now let’s assume that Patty buys a new high-tech pizza oven that allows her workers to become twice as productive as before. That is, the first worker now produces 18 pizzas per hour instead of 9, and so on.
How does Patty respond to this increase in the productivity of her workforce?
This is a modal window.
Beginning of dialog window. Escape will cancel and close the window.
End of dialog window.
This is a modal window. This modal can be closed by pressing the Escape key or activating the close button.
This is a modal window.