Suppose Your Company Is in Equilibrium,with Its Capital Stock at Its

question 33

Multiple Choice

Suppose your company is in equilibrium,with its capital stock at its desired level.A permanent increase in the depreciation rate now has what effect on your desired capital stock?

• A)raises it,because the future marginal productivity of capital is higher
• B)lowers it,because the future marginal productivity of capital is lower
• C)raises it,because the user cost of capital is now lower
• D)lowers it,because the user cost of capital is now higher

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Definitions:

Comparative Advantage

The capacity of an individual or country to manufacture a given good or service more efficiently, incurring lower opportunity costs than their counterparts.

Opportunity Cost

The omission of possible gains that could come from different options when one is preferred.

Comparative Advantage

The competence of an individual, firm, or nation to forge a good or render a service with a lower forfeited opportunity compared to others in the market.

Productivity

A measure of the efficiency of production, usually defined as the ratio of outputs produced to inputs used.