Question

​michelle's business produces ceramic cups using​ labor, clay, and a kiln. she produces cups using a fixed proportion of labor and​ clay, but regardless of how many cups she​ produces, she uses only one kiln. she can manufacture 3030 cups a day with one worker and 4848 with two workers. does her production process illustrate decreasing returns to scale or a diminishing marginal​ returns

Answer 1

Diminishing marginal returns - By investing in hiring an additional worker, Michelle does not receive twice the productivity compared to when she had only 1 worker. Productivity only increased by roughly 50%. I would consider the worker to be more of an investment, and thus count as diminishing marginal returns, rather than decreasing returns to scale, which I consider to apply more to assets, such as machines for manufacturing or in the case of the scenario, an additional kiln.