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Jack of all trades, master of none. This well known adage helps explain why firms sometimes experience economies of scale. A person who tries to
Jack of all trades, master of none. This well known adage helps explain why firms sometimes experience economies of scale. A person who tries to do everything usually ends up doing nothing very well. If a firm wants its workers to be as as productive as they can be, it is often best to give each a limited task that he or she can master. But this is possible only if a firm employs many workers and produces a large quantity of output. In his celebrated book an inquiry into the nature and causes of the wealth of nations, Adam Smith described a visit he made to pin factory. Can a firm have a production function that exhibits increasing returns to scale, constant returns to scale, and decreasing returns to scale as output for labor are increases? Discuss your answer with a suitable diagram
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