That is indeed a good question
KKAlps.
The potency determination begins with an estimate of the THC percentage in your herb. Average weed has about 15% THC. If you grow a good strain using what you've learned on GWE, you're likely up to 20% or higher. The latest "Super Strains" boast up to 30% THC.
Once you've picked an estimate from that range the math is pretty simple, but let's start by discussion measurement units. To make comparisons easier we want to work in milligrams (for weight) and Milliliters (for liquids) rather than ounces. The conversion goes like this:
One dry ounce = 28.35 grams & each gram = 1000 milligrams, so an ounce of herb = 28,350 milligrams (mg).
One liquid ounce = 28.4 milliliters
So, for example, your proposed two ounces of decarbed weed will weigh about 56,700 mg, of which let's say 20% is THC available for extraction. 56,700 times 0.20 (20% THC) = 11,340 mg THC total before extraction.
A good extraction method, like Quick Wash Ethanol (QWET) will capture about 75% of the total available so your 11,340 mg is reduced to 8,505 mg of THC after extraction (11,340 * 0.75).
Now comes the tricky part. If your extraction has captured 8505 mg of THC the potency of your final product depends on how much non-THC "Carrier) liquid those milligrams are dissolved in. For example if you used a QWET extraction and evaporated all the alcohol, the remaining oil would contain all 8505 mg of THC (and other cannabinoids and terpenes). That's why a highly concentrated rice-grain sized drizzle of RSO produces a smash mouth high.
On the other hand, since your target is CannaButter, let's say you used the Magical Butter Machine with your two ounces of 20% THC herb. The MBM recipe calls for one cup (8oz) of butter per ounce of herb. So the math for your MBM batch looks like this:
2 cups butter is 16oz * 28.4 ml per oz = 454 ml butter. (We measure the liquid butter in milliliters)
56,700 mg (2 oz of herb) * 0.020 (20% THC) * 0.75 (75% extraction efficiency) = 8,505 mg (total THC extracted) / 454 ml of butter (2 cups) = 18. 7 mg/ml THC. Notice that this 18.7 mg/ml concentration doesn't increase if you use more herb, because you also will be adding more butter per the recipe.
Most edibles recipes target between 10 - 15 mg of THC per serving, so our example makes a pretty potent CannaButter. Of course the amount delivered per serving just depends on how much butter is used in in your brownies (or whatever) divided by the number of servings.
Your question about "Diminishing Returns" due to an absorption limit remains unanswered and perhaps someone with more experience can help. I believe the Magical Butter Machine recipe ratio of a cup of buttter for each oz of herb is intended to produce the "Normal" target potency rather any absorption limitation.