If Input Prices Are Constant, a Firm with Increasing Returns

question 107

Multiple Choice

If input prices are constant, a firm with increasing returns to scale can expect:

• A) costs to double as output doubles.
• B) costs to more than double as output doubles.
• C) costs to go up less than double as output doubles.
• D) to hire more and more labor for a given amount of capital, since marginal product increases.
• E) to never reach the point where the marginal product of labor is equal to the wage.

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Definitions:

Dividend Policies

The guidelines a company follows to decide how much it will pay out to shareholders in dividends.

GDP Growth Rate

The rate at which a country's Gross Domestic Product (GDP) increases or decreases over time, indicating economic growth or decline.

Interest Rate

The percentage of a sum of money charged for its use, often expressed as an annual percentage rate.

Pro Forma Statements

Financial statements that project the future financial position of a company, based on current data and assumptions about future activity.