Consider an Economy Described by the Production Function Y = $\sqrt { K }$

question 234

Multiple Choice

Consider an economy described by the production function Y = $\sqrt { K }$ with 30% of output invested in new capital and 6% of the capital stock depreciating each year. If the current capital stock is 30, then the economy's capital stock would:

• A) grow, and the output next period would increase.
• B) grow, but the output next period would decrease.
• C) shrink, but the output next period would increase.
• D) shrink, and the output next period would decrease.

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Definitions:

Dividend Revenue

Income earned by shareholders when a company distributes a part of its earnings to its stockholders.

Common Stock

Equity ownership in a corporation, with rights to vote on corporate matters and receive dividends.

Operating Revenue

Operating revenue refers to the income generated from a company's primary business activities, such as sales of goods or services.

Other Revenues and Gains

Income streams and financial gains that do not arise from the primary operations of a business.