The boss observes that her 10 workers produce 1,000 widgets a day. she concludes that she can employ 20 workers and make 2,000 widgets, 30 to make 3,000, or 40 to make 4,000. This observation is incorrect.
Why this observation is incorrect?
She is most likely incorrect because of the law of diminishing returns. Adding more and more of a variable resource (labor) to a fixed resource (the factory and machinery) should cause output to increase, but at a decreasing rate. If the company is experiencing diminishing returns, we might expect something like 20 workers producing 1,800 units, 30 producing 2,500 units, and 40 producing 3,300 units.
To learn more about law of diminishing returns, refer to:
brainly.com/question/19070161
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