An Island Nation Is in a Steady State

question 89

Multiple Choice

An island nation is in a steady state.A major hurricane passes over the nation and destroys 25 percent of the physical capital.In the years that follow the storm,one would expect investment to ________ and net investment to ________.

• A) decrease; decrease
• B) increase; increase
• C) decrease; increase
• D) increase; decrease
• E) decrease; remain the same

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Definitions:

Total Utility

The total satisfaction received from consuming a particular quantity of goods or services.

Marginal Utility

The added satisfaction a consumer gets from having one more unit of a good or service.

Diminishing Marginal Utility

A principle in economics that posits an individual gains less satisfaction from consuming each additional unit of the same product or service.

Marginal Utility

The extra pleasure or advantage gained from using another unit of a product or service.