The Law of Diminishing Marginal Returns Holds That The

question 154

Multiple Choice

The law of diminishing marginal returns holds that the:

• A) marginal product of any variable factor of production will eventually decline, assuming the quantities of other factors of production are given.
• B) total product of any variable factor of production will eventually decline, all other things unchanged.
• C) total product can only increase so long, because factors of production eventually become tired or wear out.
• D) marginal product of any variable factor of production will at some point decline, because it will eventually become burdened with an excess and overwhelming abundance of other factors in the long run.

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Definitions:

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating a company's fixed versus variable costs ratio.

Money Supply

The total amount of monetary assets available in an economy at a specific time, including cash, coins, and balances held in checking and savings accounts.

Investment

The allocation of resources, such as capital or time, with the expectation of generating an income or profit.

Consumption Goods

Products and services that are used by individuals for personal enjoyment and satisfaction, not for further production.