You live near a small bakery and get your bread there every Saturday morning. Saturday is the busiest day of the week for the shop, so it decides to take on a few extra assistants.

During the week, only one assistant serves the customers, but on a Saturday morning, there used to be five available to help with the service. However, they could not serve five times as many customers due to the law of diminishing returns with regard to labor.

Certain factors of production in the bakery are fixed -

1) The shop is of fixed size, so customers would be crammed together and the five assistants would get in each others way.

2) There is only one cash register, so assistants had to wait for others to use it.

3) There is only one station for wrapping the bread in paper, leading assistants to have to wait for that often.

The fifth and fourth assistants often wound up serving only a small number of extra customers. You are still going to the same bread shop and they still have that one wrapping station, but only three assistants are there on Saturday. The shop is just as busy. My question to you is, how would you advise the baker as to whether he or she should:

• Employ four assistants on Saturday, OR
• Extend the bakery to allow more customers to be served on a Saturday morning?