You Have Been Hired to Replace the Manager of a Firm

question 152

Essay

You have been hired to replace the manager of a firm that used only two inputs,capital and labor,to produce output.The firm can hire as much labor as it wants at a wage of $5 per hour and can rent as much capital as it wants at a price of $50 per hour.After you look at the company books,you learn that the company has been using capital and labor in amounts that imply a marginal product of labor of 50 and a marginal product of capital of 100.Do you know why the firm hired you?

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Definitions:

Production Workers

Individuals involved in the manufacturing or assembly phase of production, responsible for operating machinery, building goods, and maintaining efficiency on the production line.

Straight Piecework Plan

A compensation system where workers are paid a fixed rate for each unit produced or action performed, regardless of time.

Incentive Pay

Compensation above the base salary offered to employees as a motivation for achieving performance targets.

Piecework Rate Plans

Compensation systems where employees are paid based on the quantity of work produced or tasks completed.