If an Economy's Depreciation Is Greater Than Its Gross Investment

question 17

Multiple Choice

If an economy's depreciation is greater than its gross investment, then

• A) net investment is negative and saving is negative.
• B) net investment is positive and saving is negative.
• C) net investment must equal saving.
• D) net investment is positive and saving is positive.
• E) the economy's capital stock decreases.

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Definitions:

Competitive Firm

A business that operates in a market where it has numerous competitors and cannot set prices but rather accepts market prices.

MC

Marginal Cost, the cost incurred from producing one additional unit of a good or service.

AVC

Average Variable Cost refers to the variable costs (such as labor and materials) per unit of output produced.

MR Output

The output level where marginal revenue equals marginal cost, guiding firms in maximizing their profitability.