If the Minneapolis Cement Co. employs just one worker, that person has to perform all of the aspects of cement manufacturing. If the firm hires a second person, the two workers can specialize in different aspects of cement manufacturing and thus produce more than twice as much as one. When this occurs, the firm realizes
A) economies of scale
B) diseconomies of scale
C) increasing marginal returns
D) diminishing marginal returns

Question

Quizplus · Accepted Answer

Increasing marginal returns occur when adding an additional factor of production results in a greater increase in output, as seen when the second worker allows for specialization and more than doubles production.