Question

The menu at Joe’s coffee shop consists of a variety of coffee drinks, pastries, and sandwiches. The marginal product of an additional worker can be defined as the number of customers that can be served by that worker in a given time period. Joe has been employing one worker, but is considering hiring a second and a third. Explain why the marginal product of the second and third workers might be higher than the first. Why might you expect the marginal product of additional workers to diminish eventually?

Answer 1

The marginal product of the second and third workers might be higher than the first because workers can take advantage of existing machinery and output will increase at an increasing rate.​The marginal product could well increase for the second and third workers because each would be able to specialize in a different task. If there is only one worker, that person has to take orders, prepare the food, serve the food, and do all the cleanup. With two or three workers, however, one could take orders and serve the food while the others do most of the coffee and food preparation and cleanup. As successive workers continue to be added to the production​ process, workers may no longer be able to specialize and output will increase at a diminishing rate. As more workers are employed, the marginal product would diminish because there would be a large number of people behind the counter and in the kitchen trying to serve more and more customers with a limited amount of equipment and a fixed building size.