The Law of Diminishing Returns States That If Increasing Quantities

question 54

Multiple Choice

The law of diminishing returns states that if increasing quantities of a variable factor are applied to a given quantity of fixed factors,then

• A)the MP and the AP of the variable factor will eventually decrease.
• B)the MP will eventually decrease with constant AP.
• C)the AP will eventually decrease with constant MP.
• D)the AP will eventually decrease,but only if TP is held constant.
• E)TP will eventually begin to fall.

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Definitions:

Market Decline

A decrease in the overall value of a market, evidenced by falling asset prices and often associated with economic downturns.

Inventory Valuation

A process used to determine the cost associated with an inventory at the end of a financial period, affecting the cost of goods sold and net income.

Average Cost Method

An inventory valuation method that calculates the cost of goods sold and ending inventory based on the weighted average cost of all items available for sale.

Average Cost

An inventory costing method where the cost of goods sold and ending inventory is determined by taking the weighted average of all units purchased.