"As Additional Units of a Variable Input Are Added to a Fixed

question 209

Multiple Choice

"As additional units of a variable input are added to a fixed input, eventually the marginal physical product of the variable input will decline." This is a statement of the

• A)law of supply.
• B)average-marginal rule.
• C)law of diminishing marginal utility.
• D)law of diminishing marginal returns.

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Definitions:

Variable Expenses

Expenses that change in proportion to the amount of goods produced, including materials and wages directly associated with manufacturing.

Break-Even Analysis

A financial calculation that determines the point at which total revenues equal total costs, indicating no profit or loss.

Variable Expenses

Costs that change in proportion to the level of activity or volume of output produced.

Unit Fixed Expenses

These are expenses that do not change with the level of production or sales within a certain range and are calculated per unit of product.