A company assembles custom bicycles using a process where each assembly stand (capital) must be operated by exactly two workers (labor). A single stand with its two workers produces 4 bicycles per day. The company can set up as many of these identical stand-and-worker units as it needs. If the company currently operates with 10 workers (using 5 stands) and decides to expand to 100 workers, what will be the new average output per worker?

Evaluating a Productivity Proposal

Analyzing a Production Expansion Plan

For a production technology where each unit of output requires a fixed combination of inputs (e.g., 2 workers and 1 machine) and doubling all inputs exactly doubles the total output, a firm can increase its labor productivity (output per worker) by simply expanding its scale of operations.

Match each description of a production technology with the corresponding effect on the average product of labor (APL) as the scale of production is increased by proportionally increasing all inputs.

Explaining Constant Labor Productivity

A specialized manufacturing process requires a strict combination of 2 workers and 1 machine to produce 10 units of output per hour. If the firm scales up its operation to use 20 workers and 10 machines, it produces 100 units per hour. In this scaled-up scenario, the average product of labor is ____ units per worker per hour.

Diagnosing a Productivity Decline

A manufacturing firm operates with a technology that requires exactly one worker for each machine to produce 5 widgets per hour. This production relationship exhibits constant returns to scale. The firm currently employs 10 workers and 10 machines. If the firm hires 5 additional workers but does not acquire any new machines, what will be the new average product of labor (total widgets per hour divided by the total number of workers)?

Explaining a Decrease in Labor Productivity