A company creates 40 units of a product using 30 hours of labor and 15 sheets of paper. Labor costs $10/ hour and paper costs $50 per sheet. Each unit of the product sells for $75. What is the firm's multifactor productivity measure for labor and paper?

0.038 units per $ of factor costs

Explanation:

Labor cost for 40 units  = 30 hours × $10/hour = $300

Cost of paper for 40 units = 15 sheets × $50/sheet = $750

Output = 40 units

Multi factor productivity is expressed as;

Multi factor productivity = Output/Total Factor cost

Multi factor productivity = 40 units/$1050 = 0.038 units per $ of factor cost

Multi factor productivity is a measure that depicts units produced for every $ of factor products used. In the above case 2 factors i.e labor and paper are used.

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