Explain How the Catch-Up Theory Depends Upon Diminishing Returns to Capital

question 33

Essay

Explain how the catch-up theory depends upon diminishing returns to capital, the adaptability of technology, and the free, riskless flow of investment funds.

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Definitions:

Direct Labor Hours

The total hours worked by employees directly involved in the manufacturing process.

Payroll

The total amount of wages, salaries, and other earnings paid by a business to its employees.

Labor Efficiency

The measure of the amount of work accomplished with a specific amount of labor input.

Labor Quantity Variance

The difference between the actual labor hours worked and the standard hours expected, multiplied by the standard labor rate.