If Capital and Labor Are Perfect Substitutes in a Production

question 17

Multiple Choice

If capital and labor are perfect substitutes in a production function, the isoquants for this function will be

• A)concave from above.
• B)convex from above.
• C)a straight line.
• D)any one of these depending on the particular combination of labor and capital employed.

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Definitions:

Business Risk

The exposure a company or investor has to factors that can lower its profits or lead to its failure.

Operating Performance

A measurement of a firm's efficiency, effectiveness, and overall management's success in generating profits from operations.

Contribution Margin

The amount by which sales revenue exceeds variable costs of production, indicating how much contributes to covering fixed costs and generating profit.

EBIT

A financial indicator, Earnings Before Interest and Taxes, reflects a company's earnings by removing the effects of interest and tax expenses.