A Firm Produces Its Product Using Both Capital and Labor

question 122

Multiple Choice

A firm produces its product using both capital and labor. When it does not change its capital usage, but doubles its labor input, its output increases by less than 50 percent. Which of the following is the most likely explanation of this finding?

• A) the principle of opportunity cost
• B) the principle of diminishing returns
• C) the marginal principle
• D) the spillover principle

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Definitions:

Freud

Sigmund Freud, an Austrian neurologist who founded the field of psychoanalysis, a form of psychotherapy that emphasizes the role of unconscious factors in personality and behavioral development.

Preconscious Mind

A part of the mind that contains thoughts, memories, and feelings that are not currently in conscious awareness but can easily be brought to consciousness.

Recallable Material

Information or data that can be brought back into one's conscious mind, retrieved from memory.

Awareness

The ability to perceive, feel, or be conscious of events, objects, thoughts, emotions, or sensory patterns.