The figure below depicts a production function for a firm that produces cookies.
Figure 12-4
-The Hardboard Construction Company hired Bob at $10 an hour, but its output of doll houses only increased by three units a day. Two weeks later, the company purchased an $8 hammer for Bob and output increased by twelve units. Since the hammer increased the marginal product more than Bob did, and at less cost, Hardboard fired Bob. Is this consistent with the theory of marginal productivity? Why or why not?

Question

The figure below depicts a production function for a firm that produces cookies.
Figure 12-4 
-The Hardboard Construction Company hired Bob at $10 an hour, but its output of doll houses only increased by three units a day. Two weeks later, the company purchased an $8 hammer for Bob and output increased by twelve units. Since the hammer increased the marginal product more than Bob did, and at less cost, Hardboard fired Bob. Is this consistent with the theory of marginal productivity? Why or why not?

Quizplus · Accepted Answer

The Answer of The figure below depicts a production function for a firm that produces cookies.
Figure 12-4 
-The Hardboard Construction Company hired Bob at $10 an hour, but its output of doll houses only increased by three units a day. Two weeks later, the company purchased an $8 hammer for Bob and output increased by twelve units. Since the hammer increased the marginal product more than Bob did, and at less cost, Hardboard fired Bob. Is this consistent with the theory of marginal productivity? Why or why not?

The Figure Below Depicts a Production Function for a Firm