Take the setting of a typical McDonalds restaurant and tell the story of why increasing returns might occur from the first to the fourth employee

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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Increasing returns would happen in this case because each new employee would be able to take over one or more aspects of running the restaurant.  There would not be any duplication of effort.

If the restaurant had only one employee, that person would have to take all the orders and cook them.  This would be inefficient as the person would not be easily able to do both things at once.  If you hire the second worker, then perhaps you have one person to cook while the other takes the orders and bags up the food once it is cooked.  A third employee could split the cooking tasks so that, for example, one employee would be cooking hamburger patties (10 to a pound) while another cooks quarter pounder patties (4 to a pound) and does fries and such.  A fourth employee could, perhaps, take orders as well so that more customers could be served.

In this way, each new employee does a separate and important job. There is no duplication of work and therefore returns increase with each new employee.


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