Use the following graph to answer the next four questions.

-Suppose that the level of capital is 200,000,the depreciation rate is 15%,and investment is equal to 20,000.In this case,you would expect that:
A) the production function will shift upward.
B) the production function will shift downward.
C) there will be an upward movement along the production function.
D) there will be a downward movement along the production function.
E) there will be an upward shift of the production function and an upward movement along the production function.

Question

Use the following graph to answer the next four questions.
 
-Suppose that the level of capital is 200,000,the depreciation rate is 15%,and investment is equal to 20,000.In this case,you would expect that:
A) the production function will shift upward. 
B) the production function will shift downward. 
C) there will be an upward movement along the production function. 
D) there will be a downward movement along the production function. 
E) there will be an upward shift of the production function and an upward movement along the production function.

Quizplus · Accepted Answer

The depreciation of capital is 30,000 (15% of 200,000), which is greater than the investment of 20,000. This means the capital stock is decreasing, leading to a downward movement along the production function.

Use the Following Graph to Answer the Next Four Questions