The Principle of Diminishing Returns Does NOT Apply to Labor

question 167

Multiple Choice

The principle of diminishing returns does NOT apply to labor when all inputs are allowed to vary because:

• A)a firm can build an additional production facility so each worker's share of the facility doesn't necessarily decrease.
• B)eventually the marginal product of labor will begin to increase again.
• C)a firm can fire inefficient workers.
• D)None of the above,diminishing returns always apply.

---

Definitions:

Prepaid Insurance

An asset account that reflects insurance premiums paid in advance, which are expensed as the insurance coverage periods expire.

Current Asset

An asset on the company's balance sheet that is expected to be converted into cash within one year of the reporting date.

Adjusted Trial Balance

A statement that lists all accounts and their balances after adjusting entries are made, used to prepare financial statements.

Unadjusted Trial Balance

A preliminary report listing all the accounts and their balances from the general ledger before any adjusting entries are made to prepare financial statements.