When a Firm Has Diminishing Marginal Returns

question 351

Multiple Choice

When a firm has diminishing marginal returns:

• A) its output is falling.
• B) marginal product is falling but is likely to still be positive.
• C) total product falls because marginal product is falling and positive.
• D) marginal product is always negative.

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Definitions:

Overhead Cost Variance

The difference between the actual overhead costs incurred and the standard or expected overhead costs.

Standard Cost Card

A document that lists the standard costs associated with producing a product, including materials, labor, and overhead rates.

Direct Labor Hour

Direct labor hour refers to the time spent by workers directly involved in the production of goods or services.

Overhead Applied

A portion of overhead costs assigned to a particular cost object based on a predetermined rate.