If the Capital Stock Is Fixed and Something Happens to Raise

question 40

Multiple Choice

If the capital stock is fixed and something happens to raise the marginal product of capital for any given quantity of capital, then the real rental price of capital will:

• A)remain the same.
• B)rise.
• C)fall.
• D)fall and then rise.

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Definitions:

Direct Labor-Hours

The total hours worked by employees directly involved in manufacturing products, used as a basis for assigning labor costs to those products.

Manufacturing Overhead

All indirect costs associated with manufacturing, including costs for indirect labor, materials, and factory operations, that are not directly traceable to specific products.

Direct Materials

Direct materials refer to the raw materials that become an integral part of the finished product and can be easily traced back to it.

Direct Labor-Hours

Complete work hours of employees directly incorporated in production tasks.