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Explain the likely impact of diminishing marginal productivity of labour on cabin crew staffing levels - Edexcel - A-Level Economics A - Question 6 - 2021 - Paper 1
Question 6
Explain the likely impact of diminishing marginal productivity of labour on cabin crew staffing levels. Refer to Extract A in your answer. Examine the likely impact... show full transcript
Worked Solution & Example Answer:Explain the likely impact of diminishing marginal productivity of labour on cabin crew staffing levels - Edexcel - A-Level Economics A - Question 6 - 2021 - Paper 1
Step 1
Explain the likely impact of diminishing marginal productivity of labour on cabin crew staffing levels.
Answer
Diminishing marginal productivity of labour suggests that as more cabin crew members are added, each new member contributes less to overall output. This could impact staffing levels as airlines like United Airlines may need to ensure that they do not overstaff, which can lead to increased costs without a proportional increase in service quality. Therefore, staffing levels may be adjusted frequently to manage costs and maintain operational efficiency.
Step 2
Examine the likely impact of Thomas Cook’s plan to reduce their airline emissions (Extract B), in the social optimum position.
Answer
Thomas Cook's initiative to reduce airline emissions can be mapped in the context of externalities. The social optimum occurs when the marginal social cost equals the marginal social benefit. By improving efficiency and lowering emissions, Thomas Cook could align its operations closer to the social optimum, offering benefits not only to the company but also reducing environmental impact, which aligns with societal goals.
Step 3
Assess whether Thomas Cook’s failure was caused by the principal-agent problem.
Answer
The principal-agent problem arises when there is a conflict of interest between those who own a business (principals) and those who manage it (agents). Thomas Cook's failure may relate to this issue if management made decisions benefiting themselves rather than the long-term well-being of the company, failing to respond adequately to market changes and business risks.
Step 4
Discuss the proposed government subsidy to prevent Thomas Cook from renting its shut-down point.
Answer
A government subsidy to prevent Thomas Cook from shutting down could potentially stabilize employment and maintain service in the travel industry. However, this intervention raises questions about market distortions and the sustainability of businesses reliant on subsidies. It is crucial to consider whether such funding addresses fundamental issues or merely extends the inevitable decline.
Step 5
Critically evaluate the decision by Jet2 to increase its staff.
Answer
Jet2's decision to increase staffing levels could be seen as a proactive move to capture market share in a recovering travel sector. However, this needs to be critically evaluated against the backdrop of operational efficiency, potential overstaffing in a fluctuating market, and the ability of the management to maintain productivity with the new hires. An analysis of market demand and profitability will be essential to determine the efficacy of this decision.