Which of the Following Statements Is True

question 112

Multiple Choice

Which of the following statements is true?

• A) Due to fixed resources, an additional unit of labour always adds more to production.
• B) The marginal product of labour always increases when an additional unit of labour is employed.
• C) Diminishing returns is a rare situation that occurs only when all inputs are not fixed.
• D) The law of diminishing returns indicates that addition of an extra unit of a variable factor will decrease the marginal product.

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Definitions:

Variable Costs

Expenditures that adjust in relation to the level of production.

Fixed Costs

Costs that do not vary with the level of output produced by a firm, such as rent, salaries, and insurance premiums.

Profit

The financial gain obtained when the revenue from a business activity exceeds the expenses, costs, and taxes.

Variable Costs

Costs that change in proportion to the level of production or business activity, such as raw materials and direct labor.