Firm A decides to increase its production and produce the goods in the different plants. In the existing plant labour is in excess and its marginal production is negative. The firm decides to shift some labour from the existing plant tothe second plant. Should this transfer be facilitated ? What will be the outcome ?

Firm A decides to increase its production and produce the goods in the

1.	Firm A decides to increase its production and produce the goods in the different plants. In the existing plant labour is in excess and its marginal production is negative. The firm decides to shift some labour from the existing plant tothe second plant. Should this transfer be facilitated ? What will be the outcome ?
Answer» Answer :Firm A Should transfer the LABOUR whose marginal product is negative. The cost of transferring this labour the other plant will be least as PRODUCTION in old plant will not suffer. Also they will be more productive in the second plant as lack of fixed FACTOR was the cause of their low marginal production in the first plant. It was that ideal factor ratio in the first plant was DISTURBED by EMPLOYING excess labour when excess labour is shifted to the second plant, (where they work in the ideal factor combination) they are productively employed.