Widgets, Production, and Cost
Neral, John and Margaret Ray. "Teaching Tools Experiential Learning in the Undergraduate Classroom: Two Exercises." Economic Inquiry. 33 (1995) 170-174.
This exercise demonstrates the basic economic concept of diminishing marginal returns to students. First, the instructor places a stapler along with a stack of paper (8-1/2" x 11" sheets that been halved) on a desk in the front of the classroom. The teacher then explains that the class is going to engage in the production of widgets. A widget is produced when a sheet of paper is folded twice and then stapled closed. The professor concludes by stating that widget production will be conducted in 45-second time blocks and the labor input will be varied. For the first production block, no labor will be added and, of course, no widgets will be produced. For the next time block, one student is chosen from the class and produces as many widgets as possible during this time period. Results are recorded. During each subsequent time period, one additional student is added to the production line until after diminishing marginal returns are observed (normally around the forth or fifth round). Prices of capital and labor may be specified so students can compute total, average, and marginal costs. Results of the preceding "experiment" can be used as a springboard into a discussion of relevant economic concepts.