If a Farmer Produces 1000 Bushels of Corn Using Ten

question 39

Multiple Choice

If a farmer produces 1000 bushels of corn using ten acres of land and one tractor and is able to produce 2000 bushels of corn using twenty acres of land and one tractor,the farmer has

• A) increasing returns to scale.
• B) constant returns to scale.
• C) decreasing returns to scale.
• D) no returns to scale.

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Definitions:

Weighted Average Cost

A measure that calculates the average cost of goods available for sale, considering the weight of each unit's cost.

Cost of Equity

The rate of return that a company is expected to pay out to its shareholders for their investment in the company, factoring in the risk of the investment.

Cost of Preferred

This refers to the required return on investment for preferred stock, representing the cost to a company for issuing such stock.

Pretax Cost of Debt

The interest rate a company pays on its debts, before taking taxes into account.