| Direction: Q 1 to 5 |
| Read the given case study and answer the questions. |
| Both the forms of capital formation are the outcomes of conscious investment decisions. |
| Decision regarding investment in physical capital is taken on the basis of one's knowledge in this regard. The entrepreneur possesses knowledge to calculate the expected rates of return to a range of investments and then rationally decides which one of the investments should be made. The ownership of physical capital is the outcome of the conscious decision of the owner - the physical capital formation is mainly an economic and technical process. |
| Human capital formation takes place in one's life when she/he is unable to decide whether it would maximise her/his earnings. Children are given different types of school education and health care facilities by their parents and the society. Moreover, the human capital formation at this stage is dependent upon the already formed human capital at the school level. Human capital formation is partly a social process and partly a conscious decision of the possessor of the human capital. |
A) Human capital is intangible whereas physical capital is tangible
B) Human capital can cope up with the changing technology whereas physical capital cannot.
C) Human capital generates both personal and societal benefits whereas physical capital generates only personal benefit.
D) Human capital gets obsolete with time whereas physical capital does not
Correct Answer: D
Solution :
Continuous use of machines leads to depreciation and change of technology makes the machine obsolete, whereas in case of human capital, the extent of depreciation can be reduced through continuous investment in education, health etc.
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