Name _____________________

Practice Exercise 1

Suppose Jill Johnson opens a new pizza restaurant.Jill's restaurant uses inputs (workers and pizza ovens) to produce its outputs (pizzas).To simplify this process, we will consider only the two inputs, and we will further assume that Jill only has 2 pizza ovens.

Now, suppose Jill Johnson hires just one worker; what does that worker have to do?

? Take orders

? Make and cook the pizzas

? Take pizzas to the tables

? Run the cash register, etc.

By hiring another worker, these tasks could be divided up, allowing for some specialization to take place, resulting from the division of labor.Two workers can probably produce more output per worker than one worker can alone.Let's look more closely at what happens as Jill Johnson hires more workers.To think about this, let's consider the marginal product of labor: the additional output a firm produces as a result of hiring one more worker.

**Using the following data, calculate the marginal product of labor for each additional worker.The first worker increases output by 200 pizzas; the second increases output by 250.

Marginal Product of Labor For Jill Johnson's Pizza Place Quantity of Quantity of Pizza Quantity of Pizzas Marginal Product of Workers Ovens Produced Labor 0 2 0 1 2 200 2 2 450 W N 550 4 2 600 5 2 625 6 2 640 O