If the marginal product of capital is above the rental cost of capital, then a firm should
A) increase investment spending to increase the capital stock
B) decrease investment spending since any new investment projects will be unprofitable
C) leave investment spending at the current level since any additions to the existing capital stock will not be profitable
D) undertake only replacement investments since any additions to the capital stock will not be profitable
E) lower the actual capital stock by not replacing machines that have broken down in the production process
Correct Answer:
Verified
Q2: Which of the following statements is FALSE?
A)investment
Q3: Leaving taxes aside, a firm will calculate
Q4: Assume a Cobb-Douglas production function in which
Q5: A firm will keep investing until the
Q6: Which of the following is NOT included
Q7: The rental cost of capital will fall
Q8: Which policy mix serves best to encourage
Q9: Assume the nominal interest rate is i
Q10: The theory of investment contains aspects of
Q11: Assume a Cobb-Douglas production function in which
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents