The Term Inadequacy, as It Relates to the Useful Life

question 149

Multiple Choice

The term inadequacy, as it relates to the useful life of an asset, refers to:

• A) An asset that is no longer useful in producing goods and services.
• B) The condition where the asset's salvage value is less than its cost.
• C) The insufficient capacity of a company's plant assets to meet the company's growing production demands.
• D) An asset that is worn out.
• E) The condition where the salvage value is too small to replace the asset.

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Definitions:

Surplus Payment

Payment or benefit received that exceeds the minimum amount necessary for the transaction or exchange to occur.

MB = MC Rule

The principle that firms maximize profit by producing where marginal benefit (MB) equals marginal cost (MC), determining the optimal level of output.

Loanable Funds Theory

An economic theory that describes the market for borrowing and lending, where interest rates are determined by the supply of and demand for loanable funds.

Nominal Rate of Interest

The nominal interest rate on a loan or investment, before adjusting for inflation.