The table below presents the short run production and costs at Fast Breakfast. U

Question

The table below presents the short run production and costs at Fast Breakfast. Use the data in the
table to answer your answer the questions below.
number of workers/ wage per week/ quantity of baguel produced per week/ price of bagel
0/ 0/ 0/ $2
1/ 360/ 200/ $2
2 /360/ 380/ $2
3 /360/ 530/ $2
4 /360/620/ $2
5 /360/ 660/ $2
Page 2 of 2

a) Determine the marginal product of labour, marginal revenue product of labour, marginal
profit and total revenue.
b) Supposing Fast Breakfast employs you as a consultant, determine the profit maximizing
quantity of labour?
c) Supposing the National Union of Restaurants negotiated an increase in wage leading to
increase in wage from $360 to $400, determine the profit maximizing quantity of labour.

Explanation / Answer

No. of Workers marginal product of labour marginal revenue product of labour marginal profit total revenue.

1 200 $400 $40 $400

2 180 $360 $0 $760

3 150 $300 -$60 $1060

4 90 $180 -$180 $1240

5 40 $80 -$280 $1320

b. Profit will be maximized, when Marginal revenue product of labour = Wages

So, for Number of Workers = 2

c. If, wage increases to $400 , tehn Again equating , 400 = Marginal revenue product = Wage

So for 1 Worker , 400 = Marginal revenue product = Wage

Hence No of Workers = 1 Worker

If you don't understand anything then comment, I'ill revert back on the same, :)

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