Today's Question
Returns to scale describes what happens to output when you scale up ALL inputs proportionally. If a restaurant doubles both workers AND kitchen equipment, does output double (constant returns), more than double (increasing returns), or less than double (decreasing returns)? Why might a small startup experience increasing returns to scale, while a giant corporation experiences decreasing returns?
Model Answer
Increasing returns: Startups benefit from specialization (hiring a dedicated accountant), bulk discounts, and spreading fixed costs. A restaurant going from 1 to 2 locations might more than double output because they can now afford a manager. Decreasing returns: Large corporations face coordination problems, bureaucracy, and communication breakdowns. A company with 100,000 employees doubling to 200,000 rarely doubles output - too many meetings, too many layers of management.
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Godt spørgsmål😅 Tænker output fordobles eftersom...