The one-oven bakery

This bakery has a fixed amount of capital: one oven, one mixer and one kitchen. You can only change one thing in the short run: how many bakers you hire.

Hire bakers one at a time with the + button. Predict first: will the next baker add more loaves than the last one, or fewer?
Watch the kitchen: at first bakers specialise, then a queue forms at the oven, and eventually they get in each other's way.
Look around: drag to orbit, scroll or pinch to zoom, right-drag or two fingers to pan. Tap a tag to learn more.
The Charts tab builds total, marginal and average product, and cost per loaf, as you go.

Diminishing Marginal Returns

BIZ-OMICS · Economics & Business · Production in the short run

Name: ____________________ Class: ________ Date: __________

Key ideas

Short run: a period in which at least one factor of production is fixed (here, the oven and the kitchen).
Total product (TP): total output. Marginal product (MP): the change in total output from one more unit of the variable factor. Average product (AP): TP ÷ number of workers.
Law of diminishing marginal returns: as more of a variable factor is added to a fixed factor, the marginal product of the variable factor will eventually fall.
MP cuts AP at AP's maximum. When MP is zero, TP is at its maximum.
Link to costs: MC = wage ÷ MP and AVC = wage ÷ AP, so when MP falls, MC rises. Diminishing returns explain why short-run cost curves turn upwards.

The bakery data (one oven)

Simulator figures are simplified teaching assumptions.

Tell me why

Why did the third baker add more loaves than the first?
Why did marginal product fall after the third baker, even though every baker works just as hard?
Why does average product rise whenever marginal product is above it?
Why would no sensible bakery hire a tenth baker in this kitchen?
Explain why buying a second oven delays diminishing returns, and why this is a long-run decision.