The figure shows the depreciation function for an economy. The depreciation rate is
A) 0.10.
B) 0.010.
C) 0.0010.
D) 1.

Name: The figure shows the depreciation function for an economy. The depreciation rate is A) 0.10. B) 0.010. C) 0.0010. D) 1.
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Question

The figure shows the depreciation function for an economy. The depreciation rate is
A) 0.10. 
B) 0.010. 
C) 0.0010. 
D) 1.

Quizplus · Accepted Answer

The depreciation rate is the slope of the depreciation function. From the graph we can see that for every increase of $100 in capital stock, the depreciation is $1. Therefore, the depreciation rate is (1/100) = 0.010. So, the correct answer is B.

The Figure Shows the Depreciation Function for an Economy