Suppose a Firm Can Only Vary the Quantity of Labor

question 82

Multiple Choice

Suppose a firm can only vary the quantity of labor hired in the short run.An increase in the cost of capital will

• A) increase the firm's marginal cost.
• B) decrease the firm's marginal cost.
• C) have no effect on the firm's marginal cost.
• D) More information is needed to answer the question.

Identify the factors influencing the decision to accept or reject projects based on various financial indicators.

Understand the crossover rate and its relevance in comparing two investment projects.

Recognize the variability and uncertainty in project outcomes and the limitations of financial analysis tools.

Grasp the concept and importance of net present value (NPV) in project evaluation.

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Definitions:

Indirect Method

A method used in cash flow statement preparation that adjusts net income for non-cash transactions and changes in working capital accounts to arrive at net cash flow from operating activities.

Increase in Cash

An upward movement in the cash balance of a business during a specific period of time.

Direct Method

In accounting, a cash flow statement preparation approach that lists specific cash inflow and outflow categories directly.

Operating Activities

Business activities directly related to the production, sale, and delivery of a company's products and services, generating revenue and expenses.