If for a Firm the Price of Input a Is

question 9

Multiple Choice

If for a firm the price of input A is four times the price of input B,costs will be minimized for a given level of output when the

• A) firm uses four times as much input A as input B.
• B) total product of input A is four times greater than the total product of input B.
• C) average product of input A is four times greater than the average product of input B.
• D) marginal product of input A is four times greater than the marginal product of input B.
• E) total products of both A and B are equal to four times the marginal products of inputs A and B.

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Definitions:

Cost of Capital

Cost of capital represents the return rate an entity must pay to its stakeholders in order to justify the use of capital in the business.

Initial Outflow

The initial cash expenditure required to undertake an investment or project.

Average Accounting Return

A measure of investment profitability calculated as the average annual net earnings of a project divided by the average investment in the project.

Straight-Line Method

An accounting method for allocating the cost of an asset evenly over its useful life.