If a Firm's MPK Is Below Its User Cost of Capital,it

question 61

Multiple Choice

If a firm's MPK is below its user cost of capital,it is employing too ________ capital and its profit is ________ in the long run.

• A)little,above what it will be
• B)little,below what it could be
• C)much,above what it will be
• D)much,below what it could be

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Definitions:

Direct Write-off Method

A method of accounting for bad debts that charges the amount directly to expense when it is determined to be uncollectible.

Allowance Account

An accounting reserve set up to account for future adjustments such as bad debts or product returns.

Direct Write-off Method

An accounting method where uncollectible accounts receivable are directly written off against income at the time they are deemed non-collectable.

Allowance for Doubtful Accounts

An accounting provision representing the estimated portion of receivables that may not be collected.