The production function
, where A_t is the stock of ideas, K_t is capital, and L_t is labor, assumes that A_t is rivalrous.

Question

The production function , where A_t is the stock of ideas, K_t is capital, and L_t is labor, assumes that A_t is rivalrous.

Quizplus · Accepted Answer

The wording of the statement suggests that A_t is rivalrous, meaning that its use by one firm or individual diminishes its availability to others. However, the statement does not specify whether A_t is rivalrous or non-rivalrous, so technically it is ambiguous. However, in general, ideas and knowledge are considered non-rivalrous goods, meaning that their use by one person does not diminish their availability to others. This allows for positive spillover effects and externalities, where one firm's innovations can benefit others in the industry or economy as a whole.

The Production Function