A firm has two factories, one twice as large as the second. As the number of workers at each factory increases, which factory will experience diminishing returns first?
To find out which factory will experience diminishing returns first as the number of workers increases, we need to understand the concept of diminishing returns. Diminishing returns occur when the marginal increase in output decreases as more units of input (in this case, workers) are added while keeping other factors constant.
Let's assume Factory A is twice as large as Factory B. This means Factory A has a larger initial workforce than Factory B. To determine which factory will experience diminishing returns first, we compare the marginal output of each factory as the number of workers increases.
The larger factory, Factory A, will likely experience diminishing returns first because it initially had a larger workforce. As more workers are added to Factory A, the rate of increase in output may start to slow down. Factory A's larger size and workforce may result in a quicker saturation point where additional workers provide less marginal benefit.
On the other hand, the smaller factory, Factory B, may experience diminishing returns at a later stage because it started with fewer workers. Initially, each additional worker in Factory B may boost productivity significantly. However, as more workers are added, the marginal increase in output will eventually decrease, and diminishing returns will be observed.
To truly understand when each factory will experience diminishing returns, it would be necessary to collect data regarding the specific production processes, technologies, and other relevant factors of each factory. This empirical analysis would provide more precise information about the point at which diminishing returns occur for each factory.