To a Firm Facing Constant Input Prices, Increasing Marginal Returns

question 73

Multiple Choice

To a firm facing constant input prices, increasing marginal returns

• A)means that each additional unit of output costs more to produce than the previous unit
• B)means that the marginal product of the variable input decreases as more of the input is used
• C)can occur due to specialization and division of labor
• D)usually occur at very high rates of output
• E)can never occur

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Definitions:

Cost of Capital

The average rate a firm pays its investors for the use of their funds adjusted for taxes and administrativecosts. Also called the WACC forweighted average cost of capital.Distinguish from the costs of individualcapital components that are the adjustedrates paid on debt, preferred stock, andcommon equity. The component costs are(weighted) averaged to get the WACC

Shareholder Wealth

The overall value and financial health perceived by the shareholders of a company, often judged by the price of the company's stock and dividends paid.

Exceeds Cost

This refers to when the expenses associated with a project or operation surpass the initially estimated costs.

Return on Project

The gain or loss generated by an investment relative to the amount of money invested in the project.