Under which of the following circumstances will a competitive firm choose to own more capital, assuming that the purchase price of the capital and the interest rate remain unchanged?

Question

Quizplus · Accepted Answer

When technological improvement has made the capital more productive, the marginal product of capital increases. This means that each unit of capital will produce more output, resulting in a decrease in the marginal cost of production. Therefore, the firm will choose to own more capital to increase its profitability.

Under Which of the Following Circumstances Will a Competitive Firm