Consider the market for capital equipment. Suppose the value of the marginal product of capital equipment increases. Holding all else constant, the equilibrium rental price of capital equipment will

Question

Quizplus · Accepted Answer

When the value of the marginal product of capital equipment increases, it means that each unit of capital equipment is producing more value. This makes capital more desirable to firms, increasing the demand for capital equipment. As demand increases, the equilibrium rental price of capital equipment will increase, assuming supply remains constant.

Consider the Market for Capital Equipment