A Firm Has 100 Computers, and Each Year 5 of Them

question 125

Multiple Choice

A firm has 100 computers, and each year 5 of them become obsolete and must be recycled. This firm is in a steady state if investment each year is equal to

• A) 0.
• B) 5.
• C) 1.
• D) 100.
• E) 95.

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Definitions:

Producer Surplus

The difference between what producers are willing to accept for a product versus what they actually receive in the market.

Marginal Benefit

The increased benefit or value received from the consumption or creation of one more unit of a good or service.

Marginal Cost

The investment required to manufacture an additional unit of a product or service.

Nonrivalry

The idea that one person’s benefit from a certain good does not reduce the benefit available to others; a characteristic of a public good.