A)declines as the Firm Substitutes Labor for Capital

question 39

Multiple Choice

$$\text { For the production function } \mathrm { Q } = \mathrm { aL } + \mathrm { bK } \text {, where } \mathrm { a } \text { and } \mathrm { b } \text { are constants, the } M R T S _ { L , K }$$

• A)declines as the firm substitutes labor for capital.
• B)remains constant as the firm substitutes labor for capital.
• C)implies upward-sloping, straight-line isoquants.
• D)is undefined.

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Definitions:

Earnings per Share

A company's profit divided by its number of common outstanding shares.

Book Value per Share

This is the equity available to common shareholders divided by the number of outstanding shares, indicating the value per share if the company were liquidated.

Return on Total Assets

A financial ratio that measures the efficiency of a company's use of its assets in generating profit, calculated as net income divided by total assets.

Price-earnings Ratio

A metric used in finance to compare a firm's present stock price with its earnings for each share.