When do firms buy capital goods?
A) when firms have sufficient funds and can afford the capital goods
B) when firms have to borrow funds to buy the capital goods
C) when firms expect the investment to yield a higher return than other possible uses of their funds
D) when firms grow more optimistic about current profit prospects
E) when the capital good has a long productive life

Question

Quizplus · Accepted Answer

Firms buy capital goods when they expect the investment to yield a higher return than other possible uses of their funds. This decision is based on analyzing the potential benefits and costs associated with the purchase, as well as future trends in the market and industry.

When Do Firms Buy Capital Goods