The Amount That an Additional Unit of a Factor Adds

question 116

Multiple Choice

The amount that an additional unit of a factor adds to a firm's total revenue is called the:

• A)marginal revenue.
• B)marginal cost.
• C)additional revenue product.
• D)value of the marginal product.

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Definitions:

Risk Premiums

Additional returns expected by investors for taking on additional risk compared to a risk-free investment.

Risk-Free Rate

The return on an investment with no risk of financial loss, often represented by the yield on government securities like U.S. Treasury bonds.

Real Rate

The real rate is the interest rate that has been adjusted for inflation, representing the true cost of borrowing or the real yield on an investment, distinct from the nominal rate.

Expectations Theory

A theory that suggests long-term interest rates reflect the market's expectation for future short-term rates, assuming that investors have no preference for long versus short maturities.