This case does not directly illustrate this, because productivity increased 5%. If in the next quarter that productivity gain shrinks, that would demonstrate more clearly the law of diminishing marginal productivity. This is because, for example, if the worker is already working 49 hours in a week, if another hour is added the worker will be less productive in that 50th hour than he/she was in the 49th hour. Labor and productivity are not related to marginal utility. Marginal utility reflects the additional benefit of an additional unit of spending, where spending refers to consumption. The concept is similar to productivity, because that is spending by business on labor, but productivity is related to dollar value output, whereas utility is related to happiness and other personal benefits. The concepts are similar, but they are not the same and increased labor spending is therefore not related to marginal utility.

The case makes an allusion to the difference between short-run and long-run profits, in that the case argues that the productivity increases today will be difficult to match in the long-run, particularly as the economy improves and businesses. However, the long-run argument is not strenuously made, perhaps because there are other considerations such as improvements in technology or the cost savings associated with outsourcing. However, that the case highlights that there is a difference between short- and long-run profits and that business decisions today may reflect a trade-off between the two is a...

The abnormal increase in productivity may well be related to short-run cost improvements, but in the long-run the cost improvements may not be as significant. Labor markets, for example, are highlighted in the case as a market where short- and long-run costs can be attributed, and where firms must consider both before making decisions.
If I was an employee of one of these companies, I would consider moving on when the economy improves. If I have being squeezed by my company, that is taking something away from me that I used to have -- money or time -- leveraging the lousy employee bargaining power that occurs in recessions. However, when the U.S. economy is going well unemployment is down around 4%, which means that the employees have the bargaining power during strong economic times. I would take that bargaining power to find a firm that is less likely to squeeze me out in the next recession -- that is to say I am going to act rationally with my long-term earnings in mind.

Works Cited:

Investopedia. (2012). Rational choice theory. Investopedia.com. Retrieved January 15, 2012 from http://www.investopedia.com/terms/r/rational-choice-theory.asp

Swatos, W. (no date). Rational choice theory. Encyclopedia of Religion and Society. Retrieved January 15, 2012 from http://hirr.hartsem.edu/ency/Rational.htm