Which of the following best describes physical capital?

Question

BlackTom AI · Accepted Answer

To determine which option best describes physical capital, let's evaluate each choice.

Option a: 'The stock of equipment and structures used to produce goods and services.' This definition aligns with the standard economic concept of physical capital, which includes tangible assets like machinery, buildings, and tools that aid production. It emphasizes the part of the production process that is used up or depreciated as goods are produced.

Option b: 'The knowledge and skills workers possess.' This describes human capital, not physical capital. Human capital refers to the education, training, and experience of the workforce, which contributes to productivity but is distinct from physical assets like machinery or factories.

Option c: 'The financial assets held by businesses.' This corresponds to financial capital (funds, stocks, bonds, cash) rather than physical capital. While financial capital finances investment in physical capital, it is not itself the tangible production equipment or facilities.

Option d: 'Natural resources like oil and minerals.' These are typically categorized as natural or natural-resource capital. They are a separate factor of production from physical capital, which comprises man-made physical assets rather than inputs found in nature.

In summary, option a precisely matches the definition of physical capital as the tangible assets used to produce goods and services, while options b, c, and d refer to human, financial, and natural capital respectively, which are distinct concepts in economic theory.

Which of the following best describes physical capital?

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