4.8 Michelle's business produces ceramic cups using labor, clay,and a kiln. She uses labor and clay in a fixed proportion, but hasonly one kiln. She can manufacture 25 cups a day with one workerand 35 with two workers.a. Does this information illustrate decreasing returns to scaleor a diminishing marginal product of labor? What is thelikely explanation for why output doesn't increaseproportionately with the number of workers?b. Michelle believes that if she could use two kilns and twoworkers, she could produce 55 cups a day. If so, what canyou say about returns to scale?111 1

Decreasing returns to scale is an idea in economics that describes a state of affairs where…

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Economics

decreasing returns to scale

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 5P

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Question

4.8 Michelle's business produces ceramic cups using labor, clay,
and a kiln. She uses labor and clay in a fixed proportion, but has
only one kiln. She can manufacture 25 cups a day with one worker
and 35 with two workers.
a. Does this information illustrate decreasing returns to scale
or a diminishing marginal product of labor? What is the
likely explanation for why output doesn't increase
proportionately with the number of workers?
b. Michelle believes that if she could use two kilns and two
workers, she could produce 55 cups a day. If so, what can
you say about returns to scale?
11
1 1

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