Table 7-4 Shows the Shows the Quantities of Labor and Capital

question 62

Multiple Choice

Table 7-4 shows the shows the quantities of labor and capital required to produce various levels of output.
Table 7-4 $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Quantity of } \\\text { Capital }\end{array} & \begin{array} { c } \text { Quantity } \\\text { of Labor }\end{array} & \text { Output } \\\hline 6 & 2 & 40 \\\hline 12 & 4 & 100 \\\hline 24 & 8 & 220 \\\hline 48 & 16 & 440 \\\hline 96 & 32 & 800 \\\hline\end{array}$$
-Refer to Table 7-4.When the firm expands from 6 units of capital and 2 units of labor to 12 units of capital and 4 units of labor,the production function exhibits:

• A)increasing returns to scale.
• B)constant returns to scale.
• C)decreasing returns to scale.
• D)diminishing marginal returns.

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Definitions:

Variable Overhead Costs

Overhead costs that fluctuate with the level of production activity, such as utilities for the manufacturing plant.

Operating Capacity

The maximum output or productivity level that a company can achieve using its current resources under normal working conditions.

Fixed Overhead Costs

Expenses that do not change with the level of production, such as rent or salaries of administrative staff.

Effect On Income

The impact of specific actions, events, or decisions on a company's net income or profitability.