Problem 1. Silvio's Pizza is a small pizzeria. The firm's production function is shown in the table below:

Output with Output with

Labor Plant 1 (1 oven) Plant 2 (2 ovens)

(workers per week) (pizzas per week)

1 50 60

2 80 130

3 100 180

4 110 220

5 115 240

a. Suppose that Silvia's costs include only the cost of renting ovens, which is $100 per oven per week, the labor cost, $280 per worker per week, and the opportunity cost of Silvia's entrepreneurship, $1,000 per week. If Silvia's uses Plant 1, what is the marginal product of the 3rd worker (how many pizzas per week)? Show your calculation.

b. Suppose Silvia's uses Plant 2. If Silvia hires the 4th worker, will the firm experience diminishing, increasing, or constant returns? Explain.

c. Suppose Silvia's uses Plant 1 and hires 3 workers. What is the firm's average fixed cost? Show your calculation.

d. Suppose Silvia's uses Plant 1 and hires 2 workers. What is the firm's average variable cost? Show your calculation.

e. Suppose Silvia's uses Plant 2 and hires 4 workers. What is the firm's average total cost?

Problem 2. Answer the following question based on the figure given below:

Quantity Total cost, TC (pizzas per (dollars per hour) hour) 10 18 30 WIN 48 70 98 120