When a Firm Is Able to Put Idle Equipment to Use

question 188

Multiple Choice

When a firm is able to put idle equipment to use by hiring another worker,

• A) variable costs will rise.
• B) variable costs will fall.
• C) fixed costs will fall.
• D) fixed costs and variable costs will rise.

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Definitions:

Depletion

An accounting method used to allocate the cost of extracting natural resources over the period of their extraction.

Depreciation

A method of allocating the cost of a tangible asset over its useful life.

Total Depreciation Expense

The cumulative amount of an asset's cost that has been allocated as expense due to wear and tear over its useful life.

Land Improvements

Enhancements to a plot of land such as landscaping, parking lots, and underground utilities that increase the property's value.