T he marginal product of any input in the production process is the increase in
ID: 1099053 • Letter: T
Question
The marginal product of any input in the production process is the increase in the quantity of output produced from one additional unit of that input. According to the Law of Diminishing Returns, the marginal product of an input declines as the quantity of the input increases over time, other factors remaining the same.
In the workplace, you often see diminishing marginal product, where the additional output produced per worker drops as they perform their jobs over time.
Construct thoughtful, detailed responses to the answers.
Explanation / Answer
Answer 1
In filling a vacant position, you should be concerned with the marginal product of the last worker hired because the marginal product measures the effect on output, or total product, of hiring another worker. This in turn will help to determine the revenue generated by hiring another worker, which can then be compared to the cost of hiring another worker.
The point at which the average product begins to decline is the point where average product is equal to marginal product. When average product declines, the marginal product of the last worker hired is lower than the average product of previously hired workers.
Although adding more workers results in a further decline in average product, total product continues to increase, so it may still be advantageous to hire another worker.
The marginal product of labor will eventually diminish because there will be at least one fixed factor of production, such as capital. With capital fixed, the workplace will eventually become so congested, that the productivity of additional workers will decline. Also, with capital fixed, as more workers are added, they will need to share the fixed capital, which will eventually cause the marginal product of labor to diminish as the capital is spread across too many workers. Think for example of an office where there are only three computers. As more and more employees must share the computers, the marginal product of each additional employee will diminish
Increased Productivity Through Incentives
To get employees to work harder and improve productivity is to let them share in any gains that result from the productivity improvements. Pay-for-performance bonus systems, or gain sharing, became a popular incentive in the 1990s with both large and small businesses. For example, one restaurant in Ohio offered to pay cash incentives to all employees if food costs dropped below 35 percent of total sales. The very first month, employees offered up several money-saving suggestions that resulted in a1.7 percent drop in food costs and a $40 payout to everyone on staff. Payouts since then have gone as high as $95; in the two months where results did not meet the 35 percent goal, no payouts were made.
Gain sharing, and programs like it, have become successful because they increase employee awareness of the company's bottom line and their ability to have an impact on the firm's financial fortunes. From the employer's standpoint, gain sharing is a "win-win" proposition since employees work harder, feel more committed to the business, and profits (or some other measurable goal) improve.
Using Technology to Improve Productivity
From the time of the first factory, using machines to assist or even replace humans and improve productivity has been the norm. Using machines to create interchangeable parts, the creation of the assembly line, the use of robots to take over manual tasks
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