Question

A company has employed two workers A and B whose productivities are 20 units and 15 units respectively. The wage for A is K12 whilst B’s is K8. Are these two employees optimally employed

Answer 1

Answer:

The correct answer is, the employees are not employed optimally

Explanation:

Solution

Given that,

The Optimal level of employment is determined by the ratio of productivity of workers which  is equal to the ratio of wage rates.

Now,

The Productivity of A = 20

The Productivity of B = 15

The Ratio of productivities  is known as = 20/15

Which is  4/3

Thus,

The Wage of A = K12

The Wage of B = K8

The Ratio of wages = K12/K8 = 3/2

(4/3) is not  ≠ (3/2)

However, it is known that  the ratio of wages and ratio of productivities  are the same with each other.

For this, the employees are not optimally employed.