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Old man Terry the lemon farmer is a very old-school entrepreneur. His accountant Perry informs him that he is behind on paying his explicit costs of wages for workers and taxes to the government. Terry then sold his car because he needed the extra money to support his family and new born son Larry. The business is doing really well so Perry asks him if he should hire another worker? Terry then asked Perry what his Implicit costs are. Perry responded that his implicit cost would be buying more lemon squeezing equipment. Since Terry did not like to deal with employees, he bought the equipment. Terry then retired rich to Florida and passed the company off to his son, Larry.
Larry the lemon farmer hires one worker to hand squeeze his lemonade. He has one squeezer, one basket to hold the lemons and a bucket for the juice. Larry hires Jerry to do the job of squeezing the lemons from his orchard. Larry gets 8 gallons of lemonade per day from Jerry’s hard work. Larry becomes filled with greed and needs to make more money by hiring Barry as well. Larry though to not spend excess money, does not build another station, but wants them both to work at the same one. Jerry and Barry both make 14 gallons of lemonade, which is 6 more gallons than with just Jerry. Larry has a good harvest, so he hires Garry to his staff. All three of his workers produce 16 gallons of lemon juice for his Larry’s lemonade. Larry notices that Garry only produced 2 gallons more for all his hard work. However, since lemonade is very expensive, it is still a profit. Now, Larry decides to hire Sherry to his staff to increase his profits even more. His 4 workers struggle to produce in their cramped office space and produce 15 gallons of lemonade. Larry has a conniption because there was no extra lemonade produced. In fact, even less lemonade was produced with the added worker. Due to his frustration, Larry dies of a heart attack.
Now, while Larry was alive, his initial purchase of his one squeezer, one basket to hold the lemons and a bucket for the juice cost him $30 and each lemon cost him $0.50 . His total cost of having one worker was $38 because he squeezed 16 lemons to produce the 8 gallons of lemonade. His genetically modified super lemons are imported from Japan.
Due to Larry having no descendants, all of his company was passed to his long lost nephew Phil the hillbilly. Now Phil didn’t know much about running a company, so he started production by hiring a few workers. He noticed that for every worker he hired, his production cost was going down immensely. Phil was like “WUT!!!!”. Phil therefore hired Economist Jackson to find out why this happened. Jackson said that it was because he was experiencing the Economies of scale, but warned him that he could experience diseconomies of scale if he made too much. Phil, being a hillbilly, didn’t listen to economist Jackson and thought that if he made infinitely many products, he would be INFINITELY RICH!!! Now this didn’t work for Phil because his production cost started going up at an increasing rate because he was experiencing diseconomies of scale.
The End