Diminishing Marginal Returns Occur When

question 188

Multiple Choice

Diminishing marginal returns occur when:

• A) each additional unit of a variable factor adds more to total output than the previous unit.
• B) an additional variable factor adds less to total output than the previous unit.
• C) the marginal product of a variable factor is increasing, but at a decreasing rate.
• D) all of the above are true.

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Definitions:

Cash Inflow

Money coming into a business or project from various sources, including sales, investments, and financing activities.

Profitability Index (PI)

A calculation that determines the relative profitability of an investment, indicating the ratio of payoff to investment amount.

Internal Rate of Return (IRR)

The Internal Rate of Return (IRR) is the rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equals zero, used as a benchmark to decide the profitability of an investment.

Net Present Value (NPV)

NPV is a financial metric used in capital budgeting to assess the profitability of an investment or project, calculated as the difference between the present value of cash inflows and outflows.