Question

Which of the following statements is true? a New technologies that reduce production costs, and thus the price of the good, will spread rapidly throughout the industry as a result of competition. b “Creative destruction” occurs when new goods and production methods make firms that are not able or willing to adjust go bankrupt. c The market system leads to even greater capital accumulation as it rewards the worst firms with more profits (and thus more available funds for them to invest and expand their operations). d All of the above. e Only a) and b)

Answer 1

Solution: Only a) and b)

Explanation: Market system enhances the accumulation of capital as it provides resources required for the production of more capital goods through the increased dollar votes. New technologies decreases the costs of production; and creative destruction arises when new goods and methods of production make firms that are not willing or able for making the adjustment to go bankrupt