A pizza shop's marginal product of labor, measured as the number of pizzas delivered per week, is MP_L = 55 - 5L, where L is the number of workers. The average price of a pizza in this highly competitive market is $10. The shop can hire workers at the market wage of $300 per week. There is a diminishing marginal product of labor when worker number ____ is hired.

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Quizplus · Accepted Answer

The marginal product of labor decreases as more workers are hired. The diminishing marginal product begins when the marginal product starts to decline. MP_L = 55 - 5L; it decreases as L increases. At L = 2, MP_L = 45, and at L = 3, MP_L = 40, showing a decrease, indicating diminishing returns start at L = 2.

A Pizza Shop's Marginal Product of Labor, Measured as the Number