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The table below represents a production schedule for Quincy’s Quiche Corner, a restaurant in a mall that sells quiches. Assume Quincy’s operates in a perfectly competitive environment (in both input and output markets), so it is both a price-taker and a wage-taker.
a) Fill in the missing values in the table, assuming the selling price per quiche is $3.
Workers Output (quiches) Marginal Product Value of Marginal Product
1 10 10 $30
2 18 _____ $24
3 24 6 _____
4 28 _____ $12
5 30 _____ _____
b) Does marginal product increase or decrease as additional workers are hired?
Employees are primarily high school students with virtually identical skills as quiche makers, and they are paid a wage rate of $8.00 per hour.
c) If the firm follows the profit-maximizing rule, hiring additional workers as long as the value of marginal product exceeds the wage rate (or marginal profit is positive), how many workers will the firm hire?
d) Total Revenue equals price ($3) multiplied by the number of quiches produced per hour. Quincy’s has total fixed cost equal to $18 per hour. Total cost is equal to labor costs (wage rate multiplied by the number of workers employed) plus total fixed cost. Profit is equal to Total Revenue minus Total Cost. Calculate the firm’s total revenue (TR), total cost (TC), and profit, assuming it is a profit maximizer.
TR = $ TC = $ Profit = $