Vericol, Inc. manufactures drugs using workers and automated machines. The firm has decided to replace two workers with a new machine, while the output per day is not expected to change. Which of the following cannot be true?
A) labor productivity will increase
B) machine productivity will decrease
C) labor productivity will decrease
D) multifactor productivity will increase
E) multifactor productivity will decrease

Question

Quizplus · Accepted Answer

Labor productivity is defined as output per worker, and if the output per day is not expected to change, then labor productivity will remain the same. However, since two workers are being replaced with a machine, the labor input will decrease, so the labor productivity will actually increase. Machine productivity, on the other hand, may decrease or remain the same, depending on the efficiency and reliability of the new machine compared to the previous workers. Multifactor productivity, which takes into account all inputs (including labor and machines), will increase if the output per day remains the same while the labor input decreases. Therefore, the only statement that cannot be true is C: labor productivity will decrease.