As the cumulative amount of money invested in a firm's capital projects increases, its returns on the projects will increase.

Question

Quizplus · Accepted Answer

The statement is incorrect. The returns on a firm's capital projects may not necessarily increase as the cumulative amount of money invested increases. The Law of Diminishing Returns suggests that at some point, the marginal returns on additional investment will decrease, and there may be a point of diminishing returns where additional investment will actually lead to a decrease in returns.

As the Cumulative Amount of Money Invested in a Firm's