Homework SourseSuppose Jill owns a pizzeria In the short run the number of
Suppose Jill owns a pizzeria. In the short run the number of pizza overs Jill leases is fixed at 2. The table below illustrates her productivity of labor as she hires workers. If current wages are $10 per hour, what is her Marginal Cost?
Labor
MP
Wage
MC
1
200
2
250
3
100
4
50
5
25
6
15
| Labor | MP | Wage | MC | |
| 1 | 200 | |||
| 2 | 250 | |||
| 3 | 100 | |||
| 4 | 50 | |||
| 5 | 25 | |||
| 6 | 15 |
Solution
Price of the fixed cost (cost of operating 2 ovens) is not given. So,
MC = Change in VC / MP [VC = cost of labor = w x L = 10L]
As is seen, MC is constant at $10.
| L | MP | w = 10 | VC = L x w | MC |
| 1 | 200 | 10 | 10 | 10 |
| 2 | 250 | 10 | 20 | 10 |
| 3 | 100 | 10 | 30 | 10 |
| 4 | 50 | 10 | 40 | 10 |
| 5 | 25 | 10 | 50 | 10 |
| 6 | 15 | 10 | 60 | 10 |
