An Aggregate Production Function Exhibits Constant Returns to Scale When

question 110

Multiple Choice

An aggregate production function exhibits constant returns to scale when a 1% increase in labour input

• A)produces a 1% increase in output.
• B)along with a 1% increase in capital produces the same amount of output.
• C)along with a 1% increase in capital produces 1% more output.
• D)along with a 1% decrease in capital produces the same amount of output.
• E)induces a 1% increase in capital input.

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Definitions:

Machine-Hours

A measure of production output or activity based on the number of hours machinery is operated.

Job-Order Costing System

A methodology that assigns manufacturing costs to each individual product, allowing companies to track expenses for unique production orders.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to products or job orders, based on a particular activity base such as labor hours or machine hours.

Machine-Hours

A measure of production time, calculated as the total hours that machines are operating in the manufacturing process.