Consider a House- Construction Firm with Fixed Capital

question 92

Multiple Choice

Consider a house- construction firm with fixed capital. The firm can build 8 houses per year with 16 workers and 8.8 houses per year with 17 workers. If it is currently building 8.8 houses per year, which of the following is true?

• A) The firm has not yet reached the point of diminishing marginal productivity.
• B) The firm has already passed the point of diminishing marginal productivity.
• C) Average product is at a maximum with 16 workers.
• D) Average product is at a maximum with 17 workers.
• E) The marginal product is below the average product.

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Definitions:

Maintenance Department

The division within a company responsible for maintaining equipment, buildings, and other assets to ensure efficient operation.

Direct Expenses

Direct expenses are costs that can be directly attributed to a specific product or service, such as raw materials or labor directly involved in production.

Cash Conversion Cycle

A metric that evaluates how long it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

Expense Allocation

The process of distributing costs among different departments, projects, or accounts, based on their usage or benefit from the services.