Desired Level of the Capital Stock

question 10

Multiple Choice

Desired Level of the Capital Stock
-Consider the two graphs above.Suppose that improvements in storage technology reduce inventory losses.This would ________ the desired level of inventories,as depicted in graph ________.

• A)increase;B
• B)increase;A
• C)decrease;B
• D)decrease;A

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Definitions:

Marginal Social Cost

The total cost society bears for the production of an additional unit of a good or service, including both private costs and any externalities.

Marginal Social Benefit

The extra advantage to the community that comes from the consumption or production of an additional unit of a product or service.

Pollution Emissions

The release of pollutants into the environment, usually from industrial processes, vehicles, or other sources, which can harm human health and the ecosystem.

Marginal Social Benefit

The additional benefit to society from producing one extra unit of a good or service.