1. Robertss workshop makes desks for schools, residences and libraries around the island. The CEO recently purchased some new equipment that reduces the labor content of the jobs needed to produce the desks. Prior to buying the new equipment (table saw, wood turning lathes, planers and dust extractors), the company used 5 workers, who produced an average of 20 desks per hour. Workers pay was set at $15 per hour and machine cost was $60 per hour. With the new equipment, it was possible to transfer one of the workers to another department, also equipment cost increased by $10 per hour while output increased by 5 desks per hour.

i. Compute the labor productivity under each system. (Use desks per worker per hour as the measure of labor productivity). (6 Marks)

ii. Compute the multi-factor productivity under each system. Use desks per dollar cost (labor plus equipment) as the measure. (6 Marks)

iii. Discuss the changes in productivity according to the two measures, and which one you believe is the most pertinent for this situation. (3 Marks)