Which of the following best describes physical capital?

Question

BlackTom AI · Accepted Answer

Let’s examine each option to understand what physical capital means in the context of economic resources.

Option a: 'Natural resources like oil and minerals.' Natural resources are typically classified as natural resources or land, not physical capital. They are inputs from nature, whereas physical capital refers to man-made assets used in production. So this option mislabels natural resources as physical capital.

Option b: 'The stock of equipment and structures used to produce goods and services.' This describes manufactured inputs such as machines, buildings, and infrastructure—exactly what economists mean by physical capital. These are tangible, durable goods that help convert inputs into outputs in production processes.

Option c: 'The financial assets held by businesses.' Financial assets (like cash, stocks, or bonds) are financial capital, not physical capital. They provide funding or claims on future resources but do not themselves directly embody the productive equipment or facilities used in production.

Option d: 'The knowledge and skills workers possess.' This is typically categorized as human capital, which encompasses education, training, and expertise. It enhances productivity but is distinct from physical capital, which are physical assets rather than people or their knowledge.

In summary, option b correctly identifies physical capital as the stock of equipment and structures used to produce goods and services, while the other options describe different forms of capital or resources.

Which of the following best describes physical capital?

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