Answer to Question #100708 in Microeconomics for Marium Yaseen

Question

Q 7. In a manufacturing plant, workers use a specialized machine to produce belts. A new machine is invented that is laborsaving. With the new machine, the firm can use fewer workers and still produce the same number of belts as it did using the old machine. In the long run, both labor and capital (the machine) are variable. From what you know, what is the effect of this invention on the APL, MPL and returns to scale

Answer 1

The effect of the introduction of new machine on the average product labor ( APL) leads to mobility of labor whereby, some workers are forced to move to different places of work to get higher wages.

In marginal product labor (MPL) the rate of increased production per additional worker starts to fall this means that the marginal product is diminishing.

Productivity of the inputs leads to increase of returns to scale due to invention of new machine.