The marginal product of any input in the production process is the increase in the quantity of output produced from one additional unit of that input. According to the Law of Diminishing Returns, the marginal product of an input declines as the quantity of the input increases over time, other factors remaining the same.

In the workplace, you often see diminishing marginal product, where the additional output produced per worker drops as they perform their jobs over time.

• As a manager, what are some practical things you could do to raise marginal product per employee that also benefit the firm? In your answer use a company you currently work for or one you worked for in the past.
• Give specific examples and discuss how diminishing marginal productivity affect marginal revenues and profits of firms.

Do the discussion first with citation and references. . then do the posted below.

Posted 1

Let’s start with a definition of marginal product. It is the additional output that comes from increasing one unit of input while keeping all other factors constant (Campbell, 2018, p. 971). When I was a Director of Nursing, one of the most practical concerns I could do to increase each employee’s marginal product while also benefiting the company was to include them in activities that increased their efficiency. For instance, I would provide them with paid time off, bonuses, and vacation, among other things. These incentives increase staff commitment to the organization. Furthermore, it improves their ability to engage with others, thereby increasing their productivity. Second, I would only employ workers who work extremely hard and are prepared to go above and beyond to provide excellent quality of care to the facility instead of those who show up for work to stand around and do nothing but sit at a computer to complete charting.

Diminishing marginal productivity can result in a loss of profit upon crossing a specific limit; when diseconomies of scale arise, enterprises don’t realize any cost reductions per unit of input due to increased output. Therefore, there is no advantage from producing extra units, and losses can accumulate as more units are generated. For instance, take a farmer who uses fertilizer as a component of the corn-growing process. Up to a certain point, each additional unit of fertilizer will only enhance production return slightly. The addition of fertilizer does not boost productivity and may even impair it at the critical limit. Also, take a firm with a high degree of consumer visits at particular times of the day. The firm can increase the number of employees available to assist consumers, but adding more employees would not raise overall sales beyond a certain point. It may even result in a decline in sales.

References:

Campbell, B. (2018). Marginal product. The Palgrave Encyclopedia of Strategic Management, 971-972. https://doi.org/10.1057/978-1-137-00772-8_547

Posted 2

The law of diminishing marginal productivity says that as more and more units of one factor are added while holding all other factors constant, output will eventually increase at a decreasing rate (Storrie, 2020). Every additional unit will not result in an equal increase of overall productivity. If I worked as a manager in a manufacturing facility, one thing that could be done to raise marginal product while also benefiting the company, would be to pay per unit manufactured. Or one option would be to pay on a threshold scale. You can make 100% if you hit the threshold, 90% of you hit a certain percentage less than the target, and 110% if you hit a certain percentage above the target. This would keep the employees trying to push for increased output, which would benefit the company in additional product available to be sold. In a previous company of mine I sold wheelchairs. I was incented to sell more with making a higher commission. The staff that built and repaired the wheelchairs were paid by the hour and didn’t really care how many they got out in one day. I suggested a system where they could be bonused if they got through a certain percentage of incoming orders per day or per week, but it wasn’t received well. The longer they worked, the more tired they got and the less output they had.

If a bakery pays a baker $15/hr and their output is 24 cupcakes an hour, you would think that hiring an additional baker that is equally capable would double their output to 48 cupcakes per hour. The problem is that there is only one oven, so baker #2 needs to wait for baker #1 to finish before putting their cupcakes in the oven. Instead of double the capacity and double the profit, there would be less than that, showing an example of the affect of diminishing marginal productivity.

References:

Storrie, C. L. (2020). THE ECONOMICS OF CUPCAKES: A CLASS ACTIVITY ON THE LAW OF DIMINISHING MARGINAL PRODUCT. Journal for Economic Educators, 20(2), 46-51.

Posted 3

I currently work at T-Mobile and one of the benefits available to employees from the company management is tuition reimbursement. For years this wasn’t appealing to me because I thought it was only available to use on an undergraduate education, which I already had. However, last year I found out that it’s also available to use for graduate studies. Since I am now taking advantage of this benefit in my MBA courses at Purdue Global, I am more motivated in my job and therefore have increased my marginal productivity. The tuition benefit is a boon to me as the employee and the company, because of my new productivity and the fact that my knowledge can be used to improve my work at the company itself. Tuition reimbursement is one practical benefit the company could offer. As a manager, I could offer to let my employees leave an hour early on Fridays. This would help employees in their work life balance, which would in turn make them more satisfied and improve their productivity.

Give specific examples and discuss how diminishing marginal productivity affect marginal revenues and profits of firms.

If a Mexican restaurant wanted to attract more customers, it could put double the meat in its enchiladas. For a while, this would boost customer count and profits. Eventually though, adding more and more meat will become too expensive for the restaurant to sustain (diminished marginal productivity). Also, at some point, there will be too much meat in the enchiladas for customers to enjoy, which could cause customer levels to fall again and profit to fall with it (Young, 2021).

Reference

Young, J. (2021). Law of diminishing marginal productivity. Investopedia. https://www.investopedia.com/terms/l/law-diminishi…

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