As a Result of a Fire, a Small Business Owner

question 101

Multiple Choice

As a result of a fire, a small business owner loses some of her computers and other equipment. If the property of diminishing returns applies to all factors of production, she should expect to see

• A)an increase in the marginal productivity of her remaining capital and an increase in the marginal productivity of her labor.
• B)an increase in the marginal productivity of her remaining capital and a decrease in the marginal productivity of her labor.
• C)a decrease in the marginal productivity of her remaining capital and an increase in the marginal productivity of her labor.
• D)a decrease in the marginal productivity of her remaining capital and a decrease in the marginal productivity of her labor.

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Definitions:

Personal Costs

Expenses that directly affect an individual, often considered in decisions involving personal finance or effort.

Benefits

Advantages or positive outcomes derived from a particular action or policy.

Free Good

A good that is available without any cost, typically because it is abundant or not owned by any one entity.

Economizing Behavior

The practice of minimizing costs or expenditures while achieving desired outcomes.