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In: Economics

A rapidly-growing fast-casual restaurant serving a regional market in the Ohio and Indiana markets was concerned...

A rapidly-growing fast-casual restaurant serving a regional market in the Ohio and Indiana markets was concerned about meeting demand for its burritos and burrito bowls during peak lunch hours. Therefore, the firm added a series of workers in a pilot test in their busiest shop in western Ohio. The shop added more and more workers trying to find their most efficient production point given additional workers. The following table depicts their production capabilities between their critical hours of 11:00 a.m. and 2:00 p.m. Note there have been no changes to the equipment or to the physical plant of the shop; only the number workers has changed.

Number of Part-Time Workers Added

Additional No. of Burritos During 3 Hours

1

20

2

36

3

46

4

50

5

48

6

40

7

28

  1. Graph the performance of the workers using Excel; connect the points on the graph with a line or curve.
  2. What principle of economics has the firm encountered in its pilot test of adding workers attempting to meet peak lunch demand?
  3. Will this principle have any effect on the costs of the firm at some point? Please explain the relationship between costs and production changes displayed in the graph.

Explanation must be one paragraph long. The explain must be clear and persistent, and list number for answer.

Solutions

Expert Solution

a) The graph obtained from plotting the data is given as follows.

b) The principle of diminishing marginal productivity has been encountered by the firm in this pilot test. According to the principle, keeping all other factors same, if we keep on adding a factor, then initially the marginal productivity of that factor will increase, then reach a maximum and after a certain point, it will decrease. Here, the equipment and other capitals are the same. As the firm adds more workers, initially it increases the output, After a certain point, there are more workers and less space and equipment to work with, Thus, productivity decreases and output decreases.

c) As more workers are hired, the cost of the firm increases. Thus, the cost will keep on increasing as more workers are hired. However, production will decrease after a certain point and cost will be higher than the amount of production. The firm's profit will decrease. This is shown in the graph below.

Rahul Sunny answered 2 years ago
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