Question

1. Changing production process increase multifactor and decrease its capacity?

Answer 1

No. The change in production process increase multifactor productivity and may also increase capacity. The labor productivity relates to change in output amount on per hour labor wage. The material productivity relates to change in output basis per unit change in material cost. Multifactor productivity relates to change in management process which computes change in output basis per unit change in input.

Multifactor productivity = Output per unit or time/Input cost per unit of time

So, the aim of production process change is to increase multifactor productivity. It can be achieved by increasing the output by increasing the capacity or reducing the input cost. So, capacity may increase or remain constant