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    The law of diminishing returns and the business

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    How would you estimate additional dollar cost of adding sales people? How is the expected net revenue generated by adding an additional salesperson given a company's past sales experience? How would these cost and revenue estimates be used to determine whether a sales force increase is warranted? For example a company currently has 60 salespeople and wants to add another 5 to 10 more. Is there a specific equation?

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    You can use the economic theory of diminishing marginal returns.

    The theory of diminishing return states that in a certain system of production, after some level the increase in the variable input does not result in additional increase in the output. The theory of diminishing return is also commonly known as the law of diminishing returns or diminishing marginal ...

    Solution Summary

    This solution discusses the pros and cons of adding workers. The economic concept of the law diminishing marginal returns is applied in this situation.