In the Long Run, the Law of Diminishing Marginal Returns

question 53

Multiple Choice

In the long run, the law of diminishing marginal returns

• A) is not relevant because there are no fixed factors of production.
• B) does not hold because technology is a variable.
• C) does hold, regardless of production process.
• D) sometimes holds, depending on the production process.
• E) is exactly the same as in the short run.

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Definitions:

Overhead Cost

Indirect costs associated with manufacturing or producing goods, not directly tied to a specific product, including utilities, rent, and salaries of support staff.

Activity Cost Pools

Aggregations of all the costs associated with a particular business activity or process, used in activity-based costing.

Machine-Hours

A measure of the amount of time a machine is operated, used in allocating manufacturing costs to products.

Batches

Groups or sets of goods that are processed or produced together within a production cycle or process.