The Law of Diminishing Marginal Returns

question 41

Multiple Choice

The law of diminishing marginal returns:

• A)is relevant in both the short and the long-run.
• B)says that increasing fixed inputs eventually results in smaller and smaller increases in total output.
• C)says that increasing variable inputs eventually results in smaller and smaller increases in total output.
• D)says that increasing variable inputs eventually results in smaller and smaller increases in total cost.

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold in a company, including the cost of the materials and labor directly used to create the product.

FIFO Costs

First In, First Out, a cost flow assumption for inventory valuation where the oldest inventory items are recorded as sold first.

FIFO Inventory

A method of inventory valuation where the first items placed into inventory are the first ones sold; stands for First-In, First-Out.

Periodic Inventory

An inventory accounting system where inventory counts and cost of goods sold (COGS) are determined at the end of an accounting period.