Suppose Pippi buys an oven for her pizza parlour for $100,000. Pippi's pizza tasted so pitiful she went out of business 12 months later. She was able to sell the pizza oven for $75,000. This decrease in the value of the oven is
A) economic depreciation.
B) the total implicit rental rate on the oven.
C) interest forgone.
D) an economic loss.

Question

Quizplus · Accepted Answer

Economic depreciation refers to the decrease in the asset's value over time due to use, wear and tear, or obsolescence. In this case, the oven's value decreased from $100,000 to $75,000, which is an example of economic depreciation.

Suppose Pippi Buys an Oven for Her Pizza Parlour for $100,000