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pearsaltchocolatebar ,

Just one caveat - if you double production, you’re not doubling your income or profit.

Darkard ,

That’s why the realistic outcome to this scenario is that she fires half her workforce there by maintaining the same level of production while also slashing labour costs.

Ummdustry ,

I mean you might be, depending upon what % of the total market you operate and what the exact inputs of the new method are.

pearsaltchocolatebar ,

No, you never will without increasing prices to cover the additional overhead of increased production.

Remember, only the machine is doubling efficiency, but operations has to increase to handle the new output and resources required.

Ummdustry ,

But some operational costs (I.e. Ground Rent, Marketing, Legal Fees, IP Costs etc…) do not scale with increased output.

moody ,

Nor does demand for your product.

Ummdustry ,

Again this is a case of “it depends”. If you are not a market driver then yes it does. (‘mom & pop motor vehicles’ isn’t going to make a dent in the global car market. )

trolololol ,

Not if most of you cost is labor, you’ll be approaching marginal increase in costs but still certainly of double income.

pearsaltchocolatebar ,

The labor costs aren’t going away, just shifting. You have to increase employment in other areas to handle a 100% increase in product output.

Besides the fact that labor costs are rarely a large enough portion of a manufacturer’s budget to make that big of a difference.

antidote101 ,

I think the comic is supposed to be a lampooning of Ayn Rand’s philosophy… Not an accurate model of business considerations within a production based industry.

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