A Firm who producing Tires for Cars

A FIRM WHO PRODUCE TIRES FOR CARS 

A tire is important to a car. 
It plays an important role when a driver driving a car. 
A good quality tire has a higher quantity demand 
In order to let drive more safety on the road. 

So, a firm who produce tires for cars 
need a large number of workers 
or a small number of workers when producing tires? 

• HOW IF THIS FIRM HAS A SMALL NUMBER OF WORKERS ?

This firm will has a fixed number of machineries. If only 2 or 3 workers are hired by this firm, then the total output will be very low. Because they will have to do many different jobs and advantages of specialization will not be occur. The workers will lose many time for just switching from one job to another. Thus, the machines also will need to stay a lot of time idle. 

So, this firm will be produce underproduction of goods if this firm has a small numbers of workers. 

If the firm hired many workers

the production will be more efficient 

marginal product (MP)  will rise too. 

• HOW IF THE FIRM HAS A LARGE NUMBER OF WORKERS ?

When more and more workers added, this firm will be overcrowded. Workers have to wait to use the machineries. Total output will increase at a diminishing rate, because when have a fixed-size firm, each additional worker will have less additional capital to work with, as more worker is hired.

Law of diminishing returns in this firm, states that when an additional workers are added to additional machineries, the marginal product of the workers will declines when it beyond a point. 

[ sources :  http://www.scribd.com/doc/68578646/Pirayoff-R-CliffsAP-Economics-Micro-Macro-Wiley-2004-ISBN-076453999X-268s-GG ]

[ sources : http://tutor2u.net/economics/revision-notes/a2-micro-shortrun-longrun-production.html ]

[ sources : http://justdan93.wordpress.com/tag/short-run-production-relationship/ ]

Writen by : Sia Shi Min