True or False: The shape of the total physical product curve reflects the law of increasing marginal returns. A.) TrueB.) False Susan's Performance Pizza is a small restaurant in San Francisco that sells gluten-free pizzas. Susan's very tiny kitchen has barely enough room forthe four ovens in which her workers bake the pizzas. Susan signed a lease obligating her to pay the rent for the four ovens for the next year. Becauseof this, and because Susan's kitchen cannot fit more than four ovens, Susan cannot change the number of ovens she uses in her production of pizzasin the short run.However, Susan's decision regarding how many workers to use can vary from week to week because her workers tend to be students. Each Monday,Susan lets them know how many workers she needs for each day of the week. In the short run, these workers areinputs, and theinputs.ovens areSusan's daily production schedule is presented in the following table.Fill in the blanks to complete the Marginal Physical Product of Labor column for each worker.OutputMarginal Physical Product of Labor(Pizzas)(Pizzas)Number of Workers012345060100130150160On the following graph, plot Susan's total physical product curve (TPP) 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). QUANTITY OF OUTPUT (Pizzas)200180TOTAL COST(Dollars)160140120100806040200200180Suppose that labor is Susan's only variable cost and that she has a fixed cost of $20 per day and pays each of her workers $30 per day.160Use the orange points (square symbol) to plot Susan's total cost curve on the following graph using the quantities from the preceding table.140120100806040020012LABOR HIRED (Number of workers)30420TPP40 60 80 100 120 140 160 180 200QUANTITY OF OUTPUT (Pizzas)-O-Total Cost?

Answered: True or False: The shape of the total…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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True or False: The shape of the total physical product curve reflects the law of increasing marginal returns.

A.) True

B.) False

Susan's Performance Pizza is a small restaurant in San Francisco that sells gluten-free pizzas. Susan's very tiny kitchen has barely enough room for
the four ovens in which her workers bake the pizzas. Susan signed a lease obligating her to pay the rent for the four ovens for the next year. Because
of this, and because Susan's kitchen cannot fit more than four ovens, Susan cannot change the number of ovens she uses in her production of pizzas
in the short run.
However, Susan's decision regarding how many workers to use can vary from week to week because her workers tend to be students. Each Monday,
Susan lets them know how many workers she needs for each day of the week. In the short run, these workers are
inputs, and the
inputs.
ovens are
Susan's daily production schedule is presented in the following table.
Fill in the blanks to complete the Marginal Physical Product of Labor column for each worker.
Output
Marginal Physical Product of Labor
(Pizzas)
(Pizzas)
Number of Workers
0
1
2
3
4
5
0
60
100
130
150
160
On the following graph, plot Susan's total physical product curve (TPP) 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).

QUANTITY OF OUTPUT (Pizzas)
200
180
TOTAL COST(Dollars)
160
140
120
100
80
60
40
20
0
200
180
Suppose that labor is Susan's only variable cost and that she has a fixed cost of $20 per day and pays each of her workers $30 per day.
160
Use the orange points (square symbol) to plot Susan's total cost curve on the following graph using the quantities from the preceding table.
140
120
100
80
60
40
0
20
0
1
2
LABOR HIRED (Number of workers)
3
0
4
20
TPP
40 60 80 100 120 140 160 180 200
QUANTITY OF OUTPUT (Pizzas)
-O-
Total Cost
?

Expert Solution

Step 1

The law of increasing marginal returns also called the law of diminishing costs states that as far as all the variables are kept constant, there will be extra efficiency i.e. the extra output that can be manufactured by adding extra labor or any other input. There would also be reduced marginal cost i.e. the extra cost incurred in producing one extra unit. The law of increasing and diminishing marginal returns is used by companies to know the optimum choice that would increase their efficiency.

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