managerial economics

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After two quarters of increasing levels of production, the CEO of Canadian Fabrication & Design was upset to learn that, during this time of expansion, productivity of the newly hired sheet metal metal workers declined with each new worker hired. Believing that the new workers were either lazy or ineffectively supervised (or possibly both) the CEO instructed the shop foreman to "crack down" on the new workers to bring their productivity levels up.
a. Explain carefully in terms of production theory why it might be that no amount of "crack down" can increase worker productivity at CF%D.
b. Provide an alternative to cracking down as a means of increasing the productivity of the sheet metal workers.

  • managerial economics -

    a) apply the law of diminishing returns.

    a) Apply an increasing returns-to-scale reasoning argument.

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