Holding other factors constant, a higher relative price of a firm's output will:
A)increase national saving.
B)decrease national saving.
C)increase investment.
D)decrease investment.

Question

Quizplus · Accepted Answer

The higher the relative price of a firm's output, the higher is the value of the marginal product of new capital and thereby the benefit of new capital. With higher benefits, and other factors constant, investment is likely to increase.

Holding Other Factors Constant, a Higher Relative Price of a Firm's