In a Word document (double-spaced, 12-point font, 1″ margins, 3 – 5 well formed paragraphs), illustrate the Law of Diminishing Returns in an exercise using scissors, pencils, a circle template (coffee cup lid?) and paper to produce paper circles: Begin with “fixed inputs” of one pair of scissors and one pencil. Workers (labor) are the “variable input”. How many sell-able circles can one unit of labor (you) produce in one minute with one pair of scissors, one pencil and unlimited paper? (no stacking, please) *** Goal is QUALITY over QUANTITY ~ do not change the process or the quality of your circles as you move through the exercise *** Then, add one additional unit of labor with no increase in fixed inputs. What happens? Next, maintaining labor at two workers, increase the fixed inputs to two pairs of scissors and still only one pencil and unlimited paper. What happens? Continue maintaining the fixed inputs at two pairs of scissors and only one pencil, increase the labor to three workers. What happens? And finally, maintaining the fixed inputs at two pairs of scissors and only one pencil, increase the labor to four workers, then five workers. What happens? Relate your analysis to the concepts in Chapter 7; the production process, marginal product and diminishing marginal returns. Include your name, the date, the class, and the assignment title in a header. HINT: This exercise is best done at the kitchen table with “labor” who can safely use scissors. Remember that as long as some inputs are fixed, your firm is operating in the short run. You always get extra “credit” from me if you can think outside the box a bit, but remain reasonable, and of course make me smile 🙂
