In which of the following ways do capital goods differ from consumer goods?

• A. Consumer goods are only produced by the government, while capital goods are produced by private firms.
• B. Capital goods are always more expensive than consumer goods.
• C. Capital goods are used to produce other goods and services, while consumer goods are purchased for direct consumption.
• D. Capital goods cannot be resold, whereas consumer goods can be resold.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the definitions of capital goods and consumer goods. Capital goods are physical assets used in the production of other goods and services, such as machinery, tools, and buildings. Consumer goods are products purchased by consumers for direct use or consumption, like food, clothing, and electronics.
2. Step 2: Analyze each statement given in the problem to see if it correctly distinguishes capital goods from consumer goods based on their definitions and economic roles.
3. Step 3: Evaluate the statement 'Consumer goods are only produced by the government, while capital goods are produced by private firms.' Consider whether production is limited by the type of good or by the producer's identity.
4. Step 4: Assess the claim 'Capital goods are always more expensive than consumer goods.' Think about whether price alone can define the difference between these two categories of goods.
5. Step 5: Confirm the correct distinction: 'Capital goods are used to produce other goods and services, while consumer goods are purchased for direct consumption.' This highlights the functional difference between the two types of goods.