The resources owned by firms that shut down in the process of creative destruction:
A)are used in activities that are identical to the failed business.
B)are used where they have less value and thus reduce cost.
C)move to activities where they are more highly valued.
D)are liquidated and can never be used again.
E)are written off and contribute to wastage in the economy.

Question

Quizplus · Accepted Answer

In the process of creative destruction, resources owned by firms that shut down are typically reallocated to other activities where they can be more highly valued. This reallocation contributes to the overall efficiency of the economy by allowing resources to be used in their most productive capacity. Option A is incorrect because the resources are typically not used in identical activities. Option B is incorrect because reallocating resources where they have less value would not be efficient. Option D is incorrect because liquidating the resources would not allow them to be used again. Option E is incorrect because writing off the resources would not contribute to efficiency in the economy either.

The Resources Owned by Firms That Shut Down in the Process