A Firm Produces One Output Using One Input

question 11

Multiple Choice

A firm produces one output using one input.When the cost of the input was $3 and the price of the output was $3, the firm used 6 units of input to produce 18 units of output.Later, when the cost of the input was $7 and the price of the output was $4, the firm used 5 units of input to produce 20 units of output.This behavior

• A)is consistent with WAPM.
• B)is not consistent with WAPM.
• C)is impossible no matter what the firm is trying to do.
• D)suggests the presence of increasing returns to scale.
• E)suggests the presence of decreasing returns to scale.

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Definitions:

Paid In Surplus

The amount of money paid by investors for shares above their nominal value during the issuance of shares, reflecting the additional equity capital that is not registered as share capital.

Stock Split

An action by a company to divide its existing shares into multiple shares to boost the liquidity of the shares.

Market Price

The present trading price for an asset or service in the marketplace.

Par Value

Par value is the face value of a bond or the stock value stated in the corporate charter, sometimes used in reference to the nominal value of securities.