Constant Returns to Scale Implies That If N and K

question 42

Multiple Choice

Constant returns to scale implies that if N and K both increase by 3% that

• A)output (Y)will increase by 3%.
• B)Y / N will increase by 3%.
• C)Y / N will increase by less than 3%.
• D)the capital-labor ratio will increase by 3%.

Understand the principal-agent relationship and agency issues within a corporation.

Apply the corporate valuation model to estimate the value of operations and the price per share of a company.

Understand the effect of dividend policy on the application of the corporate valuation model.

Learn about the implications of executive compensation structures on company performance.

---

Definitions:

Total Overhead Variance

The difference between the actual overhead costs incurred and the overhead costs that were budgeted or applied based on a standard cost system.

Overhead Controllable Variance

Overhead controllable variance refers to the difference between expected controllable overhead costs and the actual costs directly managed by a department or manager.

Overhead Volume Variance

A measure used to evaluate the difference between expected and actual overhead costs, based on the volume of goods produced.

Materials Price Variance

The difference between the actual cost of materials used in production and the standard cost that was expected or budgeted.