Question

A manufacturing company recorded orders of 10 million products. To maintain its output volume, the company combines efforts of capital and 100, 000 workers. Suppose a new minimum wage law is imposed by the governor, leading to a higher minimum wage in the labor market. As a manager of the company, what would you do in the following situations? Please provide clear and accurate explanations to support your answer

• In the short-run, if you cannot purchase more machines (capital is fixed) and you need to maintain the company’s output volume. Would you decrease the number of workers you hired? Why?

• What would you do in the long-run if you want to maximize your profit and maintain the company’s output volume, and why?

Answer 1

This particular situation is very expected because , soometime it haappens that the governemnt increases the minimum wage of the labor which is somewhere problamatic for those company whose capital is fixed and it had to maiintian the output volume .Here we also have 100,000 worker for 10 milliion products .If we look at the situuation ,it means that for 10 millionn product = 100,000 worker which means that for 10 product we are having 1 worker..So, yes here we can optimize the output volumee by reducing the number of worker let say we reduced propoortionally with the increase in the minimum wage and according to this rreduction we will reduce the number of worker andd assing the effort of cappital and worker lefft after firring would be adjustted to complete the output volume.

In the long run we would we would maximize the labor input and more increased per day product volume so that the overall output remain ballance and Also , for profit maximizatiion , the cost cuttiing would be there such as manufactuuring cost reduction , labor cost reduction , .Also for ong term we can invest the capital whatsoever we have in automation so that , there is least requuirement of llabor and the dependency will reduce also the efficiency and the accuracy of product would be achieved a given time frame .In that way we caan achieve maximum profit .