The Bakery: "Bread & Co." Imagine a small bakery, "Bread & Co.," run by one person, Alex . Current Situation (Small Scale) : Alex works alone. He mixes the dough, bakes the bread, handles the cash register and cleans the shop. In an 8-hour day, he can produce and sell 100 loaves of bread. Now, business is booming! Alex decides to expand. He hires one more baker, Sarah , and rents the empty shop next door to double his space. After Expansion (Larger Scale): Now, "Bread & Co." has: 2 workers : Alex and Sarah. Double the equipment : 2 ovens, 2 mixers. Double the shop space. Let's see what happens to output: You might expect that doubling the inputs (labor, capital, space) would just double the output to 200 loaves. This is called " Constant Returns to Scale ." But with Increasing Returns to Scale ( IRS ), the output more than doubles. Let's say they now produce 250 loaves in the same 8 hours. Why did they get MORE than double t...