The Law of Diminishing Marginal Returns States That as

question 108

Multiple Choice

The law of diminishing marginal returns states that as

• A) a firm uses more of a variable input, given the quantity of fixed inputs, the marginal product of the variable input eventually diminishes.
• B) a firm uses more of a variable input, given the quantity of fixed inputs, the firm's average total cost will decrease eventually.
• C) the size of a plant increases, the firm's fixed costs decrease.
• D) the size of a plant increases, the firm's fixed costs increase.

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Definitions:

Goodwill

An intangible asset that arises when a company acquires another business for more than the fair value of its tangible and identifiable intangible assets.

Fair Value

The price that would be received for selling an asset or paid for transferring a liability in an orderly transaction between market participants at the measurement date.

Straight Line Amortization

A method of allocating the cost of an intangible asset evenly over its useful life.

Unrealized Profits

are profits that have been earned but not yet realized through a transaction, such as an increase in value of unsold stocks.