Why are capital goods considered limited in an economy?

• A. Because capital goods do not contribute to production
• B. Because resources used to produce capital goods are scarce
• C. Because capital goods are always imported from other countries
• D. Because capital goods are not affected by technological change

Answer: (B)

Verified step by step guidance

1. Understand the concept of capital goods: Capital goods are physical assets like machinery, tools, and buildings used in the production of other goods and services.
2. Recognize the idea of scarcity in economics: Scarcity means that resources are limited and cannot satisfy all human wants and needs simultaneously.
3. Identify that capital goods require resources to be produced, such as labor, raw materials, and time, all of which are scarce in an economy.
4. Realize that because the resources used to produce capital goods are limited, capital goods themselves are limited in quantity.
5. Conclude that capital goods are considered limited because the inputs needed to create them are scarce, not because they do not contribute to production or are always imported.