Question

How is the formation of physical capital characterised?

Options

• Influenced mainly by parents, peers, educators, and society

• Mainly an economic and technical decision

• Partly a social and partly an individual decision

• Mainly a decision involving psychic costs

Answer 1

The formation of physical capital is mainly an economic and technical decision—firms decide on machines and buildings based on costs, returns, and technology. This contrasts with human capital formation, which involves social influences.