Which of the Following Is the Most Reasonable Production Function

question 40

Multiple Choice

Which of the following is the most reasonable production function for bicycles (b) made of frames (f) , handlebars (h) , seats (s) , and wheels (w) ? (Note: frames include pedals, gears, and other parts.)

• A)b = min(f,h,s,w/2)
• B)b = fhsw/2
• C)b = min(f,h,s,2w)
• D)b = max(f,h,s,w/2)

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Definitions:

CCA Class

In Canada, Capital Cost Allowance Classes refer to categories under which business assets are placed for the purpose of depreciation calculation for tax purposes.

Maintenance Costs

Expenses incurred to keep an asset in good working condition or to repair it so it continues to operate effectively.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to analyze the profitability of an investment.

After-tax Salvage Value

The estimated value of an asset at the end of its useful life, after deducting any taxes owed from its disposal.