Which of the following best describes physical capital?

Question

BlackTom AI · Accepted Answer

Let’s break down what physical capital means in simple terms and evaluate each option against that idea.

Option a: 'The knowledge and skills workers possess' — This describes human capital, not physical capital. It refers to the abilities and expertise of people, which contribute to productivity but are separate from tangible equipment or facilities.

Option b: 'The stock of equipment and structures used to produce goods and services' — This matches the definition of physical capital: tangible assets like machines, factories, and tools that are used in production. It represents the non-human inputs that enable production activities to occur.

Option c: 'Natural resources like oil and minerals' — Natural resources are typically categorized as natural capital or land, not physical capital. They are inputs provided by nature, whereas physical capital is manufactured and owned capital goods.

Option d: 'The financial assets held by businesses' — Financial assets (cash, stocks, bonds) are not physical capital. They are financial resources that can finance investment in physical capital, but they themselves are not the physical means of production.

In summary, this question tests the distinction between different types of capital within economics. Physical capital specifically refers to the tangible produce-ready equipment and structures used in production, which is why option b is the correct characterization.

Which of the following best describes physical capital?

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