A Jiffy Lube location does 214 oil changes for 21 per 8 hour

A Jiffy Lube location does 214 oil changes for $21 per 8 hour day with a staff of 5 and 3 stalls. If the staff pay rate is $10/hour, stalls cost $40/day and all other costs are $20/day. If the multifactor productivity is closed to 10.

About what percent of what Jiffy Lube produces is goods/services?

a)90/10

b)80/20

c)20/80

d)50/50

Solution

Multifactor productivity (MFP) measures the changes in output per unit of combined inputs. In the United States, Indices of MFP are produced for the private business, private nonfarm business, and manufacturing sectors of the economy.

Multifactor productivity (MFP) reflects the overall efficiency with which labour and capital inputs are used together in the production process. Changes in MFP reflect the effects of changes in management practices, brand names, organizational change, general knowledge, network effects, spillovers from production factors, adjustment costs, economies of scale, the effects of imperfect competition and measurement errors. Growth in MFP is measured as a residual, i.e. that part of GDP growth that cannot be explained by changes in labour and capital inputs. In simple terms therefore, if labour and capital inputs remained unchanged between two periods, any changes in output would reflect changes in MFP.

Multifactor productivity = Quality produced at standard price/(Labor cost + Material cost + Overhead)