Labor Demand
Use the information below to answer the questions.
The table below represents a production schedule for Quincy's Quiche Corner, a restaurant in a mall that sells quiches, priced at $3 each (P = $3). Total Revenue (TR) equals price multiplied by the number of quiches produced per hour.
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 (W = $8). Labor costs equal the wage rate multiplied by the number of workers employed per hour.
Quincy's has total fixed cost (TFC) equal to $18 per hour.
Total cost is equal to labor costs plus TFC. Profit is equal to Total Revenue minus Total Cost
Assume Quincy's operates in a perfectly competitive environment (in both input and output markets).
Fill in the missing values in the table.
Number of Workers Output (quiches per hour) Marginal Product Value of Marginal Product
0 0
1 10 10 $30
2 18 _____ $24
3 24 6 _____
4 28 _____ $12
5 30 _____ _____
Does marginal product increase or decrease as additional workers are hired? ______________
If the firm follows the profit-maximizing rule, hiring additional workers as long as the value of marginal product exceeds the wage rate, how many workers will the firm hire? __________
Calculate the firm's hourly revenue, total cost, and profit, assuming it follows the profit-maximizing rule:
TR = ________ TC = ________ Profit = ________