The Law of Diminishing Returns Indicates That

question 401

Multiple Choice

The law of diminishing returns indicates that

• A)as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.
• B)because of economies and diseconomies of scale, a competitive firm's long-run average total cost curve will be U-shaped.
• C)the demand for goods produced by purely competitive industries is downsloping.
• D)beyond some point, the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.

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Definitions:

Income Before Taxes

A financial measure indicating the profitability of a company before accounting for income taxes.

Income Tax Rate

The percentage rate at which income is taxed by the government, varying based on income level and other factors.

Loss Carryback

A tax provision allowing companies to apply a net operating loss to previous tax years' profits, resulting in a tax refund.

Income Tax Expense

The total amount of income tax a company reports it owes in a given fiscal period.