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 workers declined with each new worker hired. Believing 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 "cracking 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.
Production theory dictates diminishing marginal returns. This means after a certain point, each additional unit of labor and capital will not increase productivity as much as the previous unit did. In this case, the company has ...