The Right of Residual Use of a Specific Asset by the Owner

question 11

Multiple Choice

The right of residual use of a specific asset by the owner often argues for:

• A) buying in the open market.
• B) long-term contracts.
• C) internal ownership.
• D) risk-sharing purchasing arrangements.

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Definitions:

Diminishing Returns

A principle stating that adding an additional factor of production results in smaller increases in output.

Marginal Product

The additional output resulting from the use of one more unit of a factor of production.

Labor

Human effort used in the production of goods and services.

Perfect Competition

A market structure characterized by a large number of small firms, identical products sold by all firms, no barriers to enter or exit the market, and perfect knowledge of prices and technology.