A manager has just replaced three workers with a machine that is cheaper to operate than the cost of the three replaced workers. Output is expected to remain the same. Which of the following is true?
A) labor productivity will decrease
B) machine productivity will increase
C) multifactor productivity will decrease
D) multifactor productivity will increase
E) the value of output will decrease

Question

Quizplus · Accepted Answer

Multifactor productivity will increase because the same output is now being produced with less labor cost, assuming other factors remain constant. This indicates an improvement in the efficiency of how all inputs (labor, capital, etc.) are used.

A Manager Has Just Replaced Three Workers with a Machine