Last Name: 1

Last Name
Course
Instructor
Date:
Assignment
a. Does the law of diminishing returns apply to Lincoln Electric? Why or why not?
The law of diminishing returns is natural in production and it exists in every organization.
According to this law increase in the input will increase the productivity of that input to a
specific point, but after that point the productivity of that input will start decreasing until it
becomes negative. In case of Lincoln Electrics, we see that the company is producing all the
highly competitive products, hence the profit margins are also dependent upon the market prices
and strategies of the competitors. The company will definitely face diminishing returns in its
production zone. All though the company will increase its fixed variables in the long term but in
the short run only labor can be increased and it is obvious to say that the labor and human
capabilities are prone to diminishing returns. (Samuelson et al, p.110). In the long run the case
could be different. As the company keeps employing all the variable factors and fixed factors, the
productivity will increase along with its increase. The diminishing returns will still be observed
when the capital starts depreciation in the long run.
b. Would it make sense for the University of Central Florida to refuse to hire disabled
professors? Why or why not?
It would not make sense if the University of Central Florida were to refuse to hire disabled
professors because of the negative implications that will meet it. For one the image of the
university will go down because people shall have a negative perspective of the university (Fevre

Last Name: 2

et al, p.11). Not hiring people who are disables will make the general public to have a negative
attitude towards the university hence; it is likely that the number of students in the institution will
see a gradual decrease. Secondly, not hiring disabled professors will mean that the University
will be met with a number of legal charges, mostly charges dealing with work place
discrimination (McColgan, p.584). Thirdly, its talent pool may go down because it may be
limiting its ability to get hold of talented professors (Fredman, p.97). Lastly, by not hiring
disabled professors it will not get the chance of getting certain tax advantages that come with
employing disabled people.

c.

Graphically illustrate and explain why downsizing is sometimes used by businesses

to increase profitability.

Downsizing increases profitability of businesses in many ways. The most important and widely
practices downsizing technique is to cut off un-necessary costs of the business (Baumol, p.26).
To increase the profitability it is necessary to layoff all the costly things, inputs, and units which

Last Name: 3

are burden for the business. For this purpose mostly businesses lay off all the extra employees
and extra units of the business which are not contributing positively. Considering a hypothetical
situation in which the extra labor employed in the business is causing extra costs and further
reduces the profits of business. The situation can be changed by firing all the extra employees.
The business should retain employees to the point where marginal productivity of labor is equal
to the marginal productivity of the capital (Sahdev, p.57). The situation is depicted in the above
graph. Let say the company is operating at point where TR touches TC from above. Here the all
the costs are recovered but the business is not getting any profits. The situation can be changed
by lying off the extra labor and reducing total productivity to the point where slope of TR and TC
are equal. The point is depicted by the highest level of profit in the above diagram.

d. Fully discuss the contributions of Ford Motor Company and the larger beer brewing
companies to the productivity & cost relationship.
The Ford Motor Company and larger beer brewing companies are using the advantages of
marginal returns in there production process. Both the companies produce more than one item
which is globally demanded and utilized. Hence due to larger production they are facing little per
unit cost for their products. For instance production of MKC by Ford motors is highly specific
and the inputs used are produced internally in the company. Hence the backward and forward
linkages are reducing their costs of production. Similarly larger beer brewing companies also try
to develop their own backward linkages to support and provide raw material to their own
production. Jensen et al (p.38) says that due to the fact that a more effective workforce can lead
to higher proceeds, equity markets like to see fine productivity development. Hollis and Aiden
(p.78) states that the bond markets, which prefer to see a low inflation circumstance, also enjoy

Last Name: 4

seeing high productivity because it can be able to keep inflation at low pressures. As productivity
goes up, inflation can be able to stem it, because the economy can be able to maintain higher
expansion than could be possible with ineffectiveness in labor markets.

Works cited
Angrist, J.D. and. Krueger, A.B. Instrumental Variables and the Search for Iden-tification: From
Supply and Demand to Natural Experiments. Journal of Economic Perspectives 15(4):
2001. 6985.
Baumol W. J., Blinder A. S. & Wolff E. N. Downsizing in America: Reality, Causes and
Consequences. New York: Russell Sage Foundation, (2003), pp.23-26.
Fevre, R. et al., Discrimination and Unfair Treatment in the Workplace. American Journal of
Industrial Relations, 22(9): ,2010, 10-12.
Fredman, S. Discrimination Law (2nd edn). Oxford: Oxford University Press, 2011. p 97
Hollis, A. Strategic Implications of Learning by Doing. International Journal of the Economics
of Business9 (2): 2002. 15774.

Last Name: 5

Jensen, J. Bradford, Robert H. McGuckin, and Kevin J. Stiroh. The Impact of Vintage and
Survival on Productivity: Evidence from Cohorts of U.S. Manufacturing Plants., Review
of Economics and Statistics, 83(2): (2001) 32323
Karl E., Fair, Ray. Principles of Economics (5th ed). Case, Prentice-Hall C. (2003, p.18-20.
McColgan, A. Discrimination Law: Texts, Cases and Materials (2nd edn, Hart Publishing, 32:
2010. 583-584.
Sahdev K., Survivors reactions to downsizing. Journal of Human Resource Management, 13 (4):
2003, 5674.
Samuelson, Paul A. Nordhaus, William D. Microeconomics (17th ed.). McGraw-Hill.
(2001)p. 110.
.