Question

# Marco's Pizza is a small pizzeria. The firm's short-run production function is described in the table...

Marco's Pizza is a small pizzeria. The firm's short-run production function is described in the table below. Assume that Marco's uses only two inputs to produce pizza: labor and capital (the oven). Marco's cost of labor is \$400 per worker per week, and his cost of capital is \$500 per week.

 Labor (workers per week) Output (pizzas per week) 1 74 2 152 3 228 4 296 5 350 6 384

In the scenario above, the marginal product of Marco's 3rd worker is

pizzas.

In the scenario above, when Marco's produces 228 pizzas per week, the firm's average total cost is:

\$

(Round your answer to 2 digits after the decimal point, e.g., 6.67)

In the scenario above, when the pizzeria increases its output from 228 to 296 pizzas, the marginal cost per pizza is:

\$

(Round your answer to 2 digits after the decimal point, e.g., 5.70)

Marginal product of Marco's 3rd worker = (Total output of 3 workers- Total output of 2 workers)= (228-152)= 76 pizzas.

 L Q TC=FC+wL AC=TC/Q MC=(Change in TC/Change in Q) 1 74 900 12.16 - 2 152 1300 (1300/152)=8.55 (1300-900)/(152-74)= 5.12 3 228 1700 7.45 5.26 4 296 2100 7.09 5.88 5 350 2500 7.14 7.41 6 384 2900 7.55 11.76

When Marco's produces 228 pizzas per week, the firm's average total cost is \$7.45.

When the pizzeria increases its output from 228 to 296 pizzas , the marginal cost per pizza is \$5.88 i.e increasing.

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