Inputs and outputs

Poornima's Performance Pizza is a small restaurant in San Francisco that sells gluten-free pizzas. Poornima's very tiny kitchen has barely enough room for the three ovens in which her workers bake the pizzas. Poornima signed a lease obligating her to pay the rent for the three ovens for the next year. Because of this, and because Poornima's kitchen cannot fit more than three ovens, Poornima cannot change the number of ovens she uses in her production of pizzas in the short run.

However, Poornima's decision regarding how many workers to use can vary from week to week because her workers tend to be students. Each Monday, Poornima lets them know how many workers she needs for each day of the week. In the short run, these workers are variable inputs, and the ovens are fixed inputs.

Poornima'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.

Number of Workers

Output

Marginal Product of Labor

(Pizzas)

(Pizzas)

0 0
1 100
2 180
3 240
4 280
5 300
On the following graph, plot Poornima'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).

Suppose that labor is Poornima's only variable cost and that she has a fixed cost of $50 per day and pays each of her workers $40 per day.

Use the orange points (square symbol) to plot Poornima's total cost curve on the following graph using the quantities from the preceding table.

True or False: The shape of the production function reflects the law of increasing marginal returns.

True

False