Tiffany florist specializes in flower bouquet for graduation, wedding and univer

Question

Tiffany florist specializes in flower bouquet for graduation, wedding and university photo day. Tiffany florist incurs a fixed cost of renting equipment of $100 per day. Each worker is paid $50 per day. The daily production is shown below:

a. What is the marginal product, MPL for the workers? What principle explains why the marginal product per worker declines as the number of workers employed increases?

b. What is the marginal cost, MC? Can you find the MC of producing each of the first 5 bouquet? 6th to 9th bouquet? And the rest? What principle explains why marginal cost per bouquet increases as the number of bouquet increases?

Number of bouquet Quantity of labor 12 14 15

Explanation / Answer

a.

The law of diminishing marginal returns is the principle which explains why the marginal product per worker declines as the number of workers increases. One explanation for this is that with each extra worker, the florist's shop becomes crowded leading to lower productivity.

b.

Marginal cost = 50 / Marginal product of labor

Marginal cost increases as the number of bouquet increases as more and more employees (with lower productivity) are required to work on the extra bouquets. For example, for the 15th bouquet, an extra employee is required who does nothing else but makes than extra bouquet, it's marginal cost being $50.

Quantity of Labor Number of Bouquet Marginal Product of Labor 0 0 0 1 5 5 2 9 4 3 12 3 4 14 2 5 15 1

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