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Storm Effects on Factor Markets: Wages and Capital Renta
Chapter 18, Problem 10(choose chapter or problem)
A storm destroys several factories, reducing the stock of capital. What effect does this event have on factor markets?
a. Wages and the rental price of capital both rise.
b. Wages and the rental price of capital both fall.
c. Wages rise, and the rental price of capital falls.
d. Wages fall, and the rental price of capital rises
Questions & Answers
QUESTION:
A storm destroys several factories, reducing the stock of capital. What effect does this event have on factor markets?
a. Wages and the rental price of capital both rise.
b. Wages and the rental price of capital both fall.
c. Wages rise, and the rental price of capital falls.
d. Wages fall, and the rental price of capital rises
ANSWER:Step 1 of 2
The stock of capital is all capital assets—such as machinery and buildings—that are available for production.
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Storm Effects on Factor Markets: Wages and Capital Renta
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In the scenario presented, a ferocious storm causes damage to multiple factories, impacting the stock of capital. This, in turn, has consequences for factors in the market, affecting both wages and the rental price of capital.