Assume a Firm Is Using 6 Units of Capital and 6

question 11

Multiple Choice

Assume a firm is using 6 units of capital and 6 units of labour to produce 6 baskets.Now it doubles both inputs resulting in a new total of 16 baskets being produced.This firm is experiencing

• A)decreasing returns to scale.
• B)increasing returns to scale.
• C)constant returns to scale.
• D)diseconomies of scale.
• E)increasing costs.

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Definitions:

Units-Of-Production Depreciation

Method that allocates the depreciable cost of an asset over its useful life based on the relationship of its periodic output or activity level to its total estimated output or activity level

Book Value

The net value of a company's assets as recorded on the balance sheet, calculated as total assets minus intangible assets (patents, copyrights) and liabilities.

Driven Miles

A metric typically used to measure the distance covered by a vehicle, often for accounting and reimbursement purposes.

Double-Declining-Balance Method

A method of accelerated depreciation which doubles the normal depreciation rate, reducing the value of an asset more quickly.