In a Small European Country, It Is Estimated That Changing

question 79

Multiple Choice

In a small European country, it is estimated that changing the level of capital from $8 million to $10 million will increase real GDP from $2 million to $3 million.What level of GDP would you expect the economy to be able to reach if spending on capital continued to rise to $12 million, assuming no technological change and no change in the hours of work?

• A)GDP would increase further, but by less than $1 million.
• B)GDP would increase further by exactly $1 million.
• C)GDP would increase further by more than $1 million.
• D)GDP would increase further by exactly $4 million.
• E)GDP would increase further, but more than $4 million.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or output, such as materials and labor.

Contribution Margin

The selling price per unit, minus the variable cost per unit, used to determine the profitability of products or services.

Fixed Costs

Business expenses that remain constant regardless of the level of goods or services produced.

Fixed Costs

Costs that do not change with the level of production or sales over a certain period, such as rent or salaries.