Suppose a Firm Uses 200 Units of Capital and 1000

question 24

Multiple Choice

Suppose a firm uses 200 units of capital and 1000 workers to produce 10,000 units of output.When the firm employs 3000 workers and uses 600 units of capital,output increases to 45,000 units.This firm exhibits

• A) Increasing returns to scale
• B) Decreasing returns to scale
• C) Constant returns to scale
• D) Diminishing marginal returns

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Definitions:

Book Income Before Income Tax

The income reported in financial statements before the effect of income taxes, reflecting the financial performance from core operation and non-operational activities.

Tax Depreciation

The method by which a business writes off the cost of a tangible asset over its useful life for tax purposes.

Book Depreciation

The allocation of the cost of a tangible asset over its useful life for accounting and tax purposes.

Tax Rate

The percentage at which an individual or corporation is taxed, or the government's claim on earnings.