If the Capital Stock Remains Fixed While the Supply of Labor

question 156

Multiple Choice

If the capital stock remains fixed while the supply of labor increases, it is likely that:

• A) the marginal productivity of labor will not change.
• B) the average product of labor will fall.
• C) the average product of labor will increase.
• D) the average productivity of labor will not change.

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Definitions:

Compounded Annually

Refers to the process of calculating interest earned on an investment or loan on an annual basis, where the amount earned is reinvested to earn additional interest in subsequent years.

Cash Flows

The cumulative exchange of cash and cash-equivalents flowing into and out of a corporate entity.

Lump Sum Payment

One lump sum payment made at a specific moment, rather than multiple smaller payments over time.

Management Contract

An agreement between two parties wherein one party agrees to manage the operations of a project or business on behalf of the other for a predetermined period and fee.