Asked by VALERIA BARDALES on Jul 21, 2024
Verified
To avoid the stock versus flow issue in production, some economists discuss capital usage in terms of rented capital. For example, your firm may not directly own some of the capital inputs to your production operation, and these capital inputs are employed on an hourly or daily basis. Which of the following inputs is a good example of a capital input that acts like a flow?
A) Land and buildings that are owned by the firm
B) A long-term licensing agreement that allows you to use a patented idea owned by another firm
C) A forklift that is rented on an hourly basis
D) all of the above
Rented Capital
The use of assets or equipment by a firm for a period of time in exchange for payment without owning them.
Capital Usage
Refers to how assets are employed within a firm to generate value, emphasizing the effective application of physical and financial capital.
Capital Inputs
The goods or services used to produce other goods or services, particularly those which are fixed like machinery or buildings versus labor.
- Comprehend the function of capital inputs and distinguish between stocks and flows within the production process.
Verified Answer
MN
Mr.Muhammad Najeeb QureshiJul 27, 2024
Final Answer :
C
Explanation :
A forklift that is rented on an hourly basis is a good example of a capital input that acts like a flow because it is employed on an hourly basis and is not owned by the firm, avoiding the stock versus flow issue in production. Land and buildings that are owned by the firm and a long-term licensing agreement that allows the firm to use a patented idea are examples of capital inputs that act like a stock because they are owned by the firm and are not employed on an hourly or daily basis.
Learning Objectives
- Comprehend the function of capital inputs and distinguish between stocks and flows within the production process.