If we assume that a unit of capital will last indefinitely, the marginal rate of return on investment equals the marginal revenue product of capital divided by its marginal resource cost.

Question

Quizplus · Accepted Answer

If a unit of capital is assumed to last indefinitely, its cost would not change over time. Therefore, the marginal resource cost of capital would be constant, and the marginal rate of return on investment would equal the marginal revenue product of capital divided by the constant marginal resource cost of capital.

If We Assume That a Unit of Capital Will Last