Question

Suppose that workers at a firm shirk and management does not discourage them from doing so. It follows that:

1) i. the level of output produced per period will be less than the level of output if laborers do not shirk
2) ii. more time will be required to produce a given level of output than if laborers do not shirk
3) iii. the total labor costs required to produce a given level of output will be greater than if laborers do not shirk but total fixed costs will be unaffected

Answer 1

When workers at a firm shirk and management does not intervene, output decreases, production time increases, and labor costs rise while fixed costs remain unchanged. This reflects inefficiencies and can lead to diminishing marginal productivity as more workers contribute less to total output.

Step-by-step explanation:

If workers at a firm shirk and management does not discourage them from doing so, several economic consequences are likely to follow:

1. The level of output produced per period will be less than the level of output if laborers do not shirk.
2. More time will be required to produce a given level of output than if laborers do not shirk, leading to inefficiencies.
3. The total labor costs required to produce a given level of output will be greater than if laborers do not shirk, although total fixed costs will remain unaffected since these costs are incurred regardless of the output level.

Diminishing marginal productivity typically kicks in as more workers are hired, because each additional worker contributes less to the total output than the previous, often due to limitations such as capital or space. This is directly related to why firms must carefully consider their staffing levels and work to maintain efficient production practices to avoid unnecessary labor costs and decreased productivity.