The marginal revenue product of capital inputs does not provide complete information about optimal use because capital is:

Question

Quizplus · Accepted Answer

The marginal revenue product of capital inputs may not provide complete information about optimal use because capital is durable, meaning that it can be used for a long period of time. This means that the optimal use of capital inputs may depend on factors such as the expected lifespan of the capital inputs, the cost of maintaining and upgrading the capital inputs over time, and the expected future demand for the output produced by the capital inputs. Therefore, while the marginal revenue product of capital inputs may be a useful guide for firms in determining the optimal level of capital inputs in the short run, it may not provide a complete picture of the optimal use of capital inputs in the long run.

The Marginal Revenue Product of Capital Inputs Does Not Provide