Creative Destruction Means That

question 11

Multiple Choice

Creative destruction means that

• A)firms develop new products that replace old products in the economy, thereby encouraging economic growth.
• B)economic growth can only be sustained if capital depreciates rapidly.
• C)knowledge capital can be created through a system of government subsidies for education and research and development.
• D)research and development should only be financed if research and development is incremental (a result of making small changes to existing products).
• E)breaking up existing companies using competition law is required for economic growth.

---

Definitions:

Fixed Budget

A budget that stays the same regardless of changes in activity levels, output, or sales.

Price Variance

The difference between the actual price paid for something and its standard or expected price.

Actual Price

The real price at which a transaction occurs, distinct from list or estimated prices, reflecting the amount paid or received in a transaction.

Standard Price

A predetermined cost attributed to materials, labor, and overhead to facilitate budgeting and variance analysis.