If Capital Is a Variable Input in Production, the Law

question 203

Multiple Choice

If capital is a variable input in production, the law of diminishing marginal returns implies that in the short run

• A) capitalʹs marginal product is constant.
• B) capitalʹs marginal product decreases after a certain point.
• C) total product is negative.
• D) total product is negative after a certain point has been reached.

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Definitions:

Working Capital

The difference between a company's current assets and its current liabilities, indicating the liquidity available to run its operations.

Current Ratio

A measure of a business's capacity to cover its short-term liabilities, found by the ratio of current assets to current liabilities.

Acid-Test Ratio

A strict metric used to assess if a business possesses sufficient current assets to meet its short-term obligations without the need to liquidate inventory.

Times Interest Earned

A financial metric indicating how many times a company can cover its interest obligations with its earnings before interest and taxes.