If investment in capital equipment requires two to three years between conceptualization and start-up to production,then

Question

Quizplus · Accepted Answer

Since there is a two to three year gap between conceptualization and start-up to production for capital equipment investment, the gap between the desired capital stock and existing capital stock is closed slowly. Therefore, option A is correct. Option B is incorrect as changes in expected sales can still increase output once the capital equipment is up and running. Option C is not necessarily correct as V* could be larger or smaller than expected depending on various factors.

If Investment in Capital Equipment Requires Two to Three Years