With Nonrivalrous Consumption, Such as in the Case of Online

question 38

Multiple Choice

With nonrivalrous consumption, such as in the case of online music and movies, as more consumers buy the product,

• A) the average cost of the output declines because the marginal cost is very small.
• B) marginal cost is low, but the average cost of the output will be rising.
• C) the average cost of the output will be rising because marginal cost is quite high.
• D) marginal cost is quite high, but the average cost of the output will be declining.

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Definitions:

Gross Investment

The total amount spent on purchasing or constructing new capital assets before accounting for depreciation.

Net Investment

The portion of total investments in physical assets (like buildings, machinery, and inventory) that remain after accounting for depreciation.

Depreciation

The process of allocating the cost of a tangible or intangible asset over its useful life, reflecting the decrease in value of the asset over time due to use, wear and tear, or obsolescence.

Stock Of Capital Goods

The total quantity of physical assets such as machinery, buildings, and equipment that are used to produce goods and services.