Constant Returns to Scale Occur When

question 14

Multiple Choice

Constant returns to scale occur when:

• A)long-run average total costs are constant as output increases
• B)marginal product of labour is falling
• C)the firm's long-run average cost curve is falling as output increases
• D)the firm's long-run average cost curve is rising as output increases

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Definitions:

Deferred Consumption Risk

The risk associated with postponing consumption today in order to invest, with the potential of not having enough resources in the future.

Liquidity Risk

The risk that an entity will not be able to meet its short-term financial obligations due to the inability to quickly convert assets to cash without significant loss.

Maturity Risk

The risk that the value of a financial instrument will change due to a change in the absolute level of interest rates, sometimes referred to as interest rate risk.

Inflation

The rate at which the general level of prices for goods and services is rising, eroding purchasing power.