The Construct of a Representative Firm Is Most Helpful in Describing

question 50

Multiple Choice

The construct of a representative firm is most helpful in describing the behavior of all of the firms in the economy when

• A) there are constant returns to scale.
• B) there are increasing returns to scale.
• C) there are decreasing returns to scale.
• D) the marginal product of labour is increasing in the amount of labour input.
• E) the marginal product of labour is decreasing in the amount of labour input.

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Definitions:

Expected Value Analysis

A form of analysis that assigns likelihoods (probabilities) to various inputs, thus incorporating uncertainty directly into the output (answer).

Probabilities

A measure representing the likelihood or chance of certain events occurring, expressed as a number between 0 and 1.

Uncertainty

A lack of definite knowledge or predictability about outcomes, often factored into decision-making and risk assessments.

Present Value Index

An index computed by dividing the total present value of the net cash flow to be received from a proposed capital investment by the amount to be invested.