High-Top Manufacturing produces extension ladders for the construction trade. They are considering automation in order to reduce the labor content needed to make each ladder. At present, there are 7 workers who produce an average of 80 ladders per hour. The hourly wage is $19, and the cost of the current machines is $50 per hour. If they invest in automation, they would only need 5 workers in the ladder department, the new equipment would cost an additional $10 per hour, and the output would increase by 5 ladders per hour.
a. Compute labor productivity under each system. Use ladders per worker per hour as the measure of labor productivity.
b. Compute the multifactor productivity under each system. Use ladders per dollar cost (labor plus equipment) as the measure.
c. Comment on the changes in productivity according to the two measures.
Remember to show your calculations in order to receive full credit