Why does depreciation decrease the stock of capital?
What will be an ideal response?
As capital stock items such as buildings and machinery become older, they wear out and become less productive. New investment is needed to replace these buildings and machinery that have depreciated or become obsolete.
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The diagram concerns supply adjustments to an increase in demand (D 1 to D 2 ) in the immediate market period, the short run, and the long run. In the immediate market period, the increase in demand will:
A. have no effect on either equilibrium price or quantity.
B. increase equilibrium price but not equilibrium quantity.
C. increase equilibrium quantity but not equilibrium price.
D. increase both equilibrium price and quantity.
Wally owns a dog whose barking annoys Wally's neighbor, Corrine. Suppose that the benefit of owning the dog is worth $700 to Wally and that Corrine bears a cost of $500 from the barking. Assuming Wally has the legal right to keep the dog, a possible private solution to this problem is that
a. Wally pays Corrine $600 for her inconvenience. b. Corrine pays Wally $400 to give the dog to his parents who live on an isolated farm. c. Corrine pays Wally $550 to give the dog to his parents who live on an isolated farm. d. The current situation is efficient.
A monopolistic competitor has fixed costs of $100 and marginal costs of $10 per unit. What is its average cost of producing 100 units?
a. $10 b. $11 c. $1,100 d. $2,000
In general, horizontal mergers will
A) increase the number of firms in an industry. B) decrease the number of firms in an industry. C) increase competition in an industry. D) reduce economic profits in an industry.