Rosa’s Performance Pizza is a small restaurant in Dallas that sells gluten-free pizzas. Rosa’s very tiny kitchen has barely enough room for the four ovens in which her workers bake the pizzas. Rose signed a lease obligating her to pay the rent for the four ovens for the next year. Because of this, and because Rosa’s kitchen cannot fit more than four ovens, Rosa cannot change the number of ovens she uses in her production of pizzas in the short run.
(a) However, Rosa’s decision regarding how many workers to use can vary from week to week because her workers tend to be students. Each Monday, Rosa let them know how many workers she needs for each day of the week. In the short run, these workers are (fill in the blank) inputs, and the ovens are (fill in the blank) inputs.
Rosa’s daily production schedule is presented in the following table:
| Number of Workers | Output (Pizzas) | Marginal Product of Labor (Pizzas) |
|---|---|---|
| 0 | 0 | - |
| 1 | 60 | |
| 2 | 100 | |
| 3 | 130 | |
| 4 | 150 | |
| 5 | 160 |
b) Fill in the blanks to complete the Marginal Product of Labor column for each worker.
c) On the following graph, plot Rosa’s production function using a green line.
d) Supposed that labor is Rosa’s only variable input cost and that she has a fixed cost of $20 per day and pay each of her workers $30 per day. Use an orange line to plot Rosa’s total cost curve on the following graph using the quantities from the preceding table.
e) True or False: The shape of the production function reflects the law of increasing marginal returns.