In a competitive market, the rental price of capital equals its marginal revenue product.

Question

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In a competitive market, the rental price of capital equals its marginal revenue product. This means that the price charged for renting or using capital goods will be equal to the additional revenue that the capital generates for the firm or individual using it. This ensures that resources are allocated efficiently, as firms will only use capital if its marginal revenue product is greater than or equal to the rental price. This principle applies to all factors of production in a competitive market.

In a Competitive Market, the Rental Price of Capital Equals