Holding Other Things Constant, an Increase in the Use of Capital

question 257

Multiple Choice

Holding other things constant, an increase in the use of capital in production would

• A) increase the marginal productivity of labor.
• B) decrease, but not proportionately, the marginal productivity of labor.
• C) not change the marginal productivity of labor.
• D) decrease proportionately the marginal productivity of labor.

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Definitions:

Debenture

Unsecured debt, usually with a maturity of ten years or more.

Line Of Credit

An arrangement between a financial institution and a customer that establishes a maximum loan balance that the borrower can access.

Carrying Costs

The cumulative expenses associated with maintaining inventory, which encompass storage fees, insurance premiums, taxes, the decrease in value over time, and the costs related to missed opportunities.

Shortage Costs

Costs incurred when demand exceeds supply, leading to inventory shortages, potentially including lost sales, backorder costs, and customer dissatisfaction.