Question

In a firm, if the employees attend a training program, then the time to assemble one unit reduces by 10%. Training program will A. increase the labor productivity only B. increase the multifactor productivity only C. increase both labor and multifactor productivity D. decrease capital productivity E. have no effect on productivity.

Answer 1

The answer is: C) increase both labor and multifactor productivity

Step-by-step explanation:

An increase in labor productivity happens when an employee can produce a larger number of units using the same amount of time. Labor productivity is part of the total factor productivity (TFP) or the multifactor productivity (MFP). So when the total labor productivity increases, so will the multifactor productivity.

Usually when one type of productivity increases, e.g. labor productivity, other factors of production will also increase their productivity, e.g. capital productivity will increase also. For example, if the worker is trained better, he will produce 2 more units using the same machinery, so because the labor productivity increased, the capital productivity also increased, i.e. the same machine can now produce two more units. That is why productivity is measured as multifactor productivity (or total factor productivity).