As the number of workers increases, so does the potential to increase profits. This can be seen in Figure 13-2, which shows how output rises with the number of workers. The curve in the figure represents the average output of an entire workforce, with each additional worker increasing the output of the entire team. As more workers are added, the output rises, and the potential for increased profits is realized.
The shape of the curve in Figure 13-2 is called a “returns to scale” curve. It represents the returns to scale, or the returns per worker, which means each additional worker increases the output per worker. It is also known as the “Law of Diminishing Returns.” The law of diminishing returns states that as more workers are added, the output per worker decreases; this is due to limitations of the workforce, such as limited space, supplies, or skills.
There are several ways to increase the output of a workforce, such as improving the working environment, providing adequate supplies, and training the workforce. These can lead to increased productivity, which can result in an increase in profits.
It is important to consider all of the factors that influence the output of a workforce before making decisions about the number of workers. It is also important to consider the returns to scale of the workforce, as it can help to determine the potential profitability of a company. Figure 13-2 provides a helpful visual representation of how increasing the number of workers can lead to increased profits.