Diminishing Returns to Capital Are a Consequence of Firms' Incentives

question 27

Multiple Choice

Diminishing returns to capital are a consequence of firms' incentives to use each piece of capital as productively as possible and illustrate the

• A) principle of comparative advantage.
• B) principle of increasing opportunity costs.
• C) scarcity principle.
• D) equilibrium principle.
• E) cost-benefit principlE.

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Definitions:

Machine-hours

The total operational time of machines within a production process, utilized for cost allocation and efficiency analysis.

Maintenance Department

The division within an organization responsible for the upkeep, repair, and servicing of equipment and facilities.

Fixed Costs

Outgoings that remain invariable, regardless of operational output or sales numbers, encompassing costs like rent, employee pay, and safeguarding premiums.

Long-run Average Demand

is the average demand forecasted over a longer period, helping in strategic planning and capacity decisions.