Higher capital utilization rates may raise user costs of capital because higher utilization rates may imply:
A)less highway congestion.
B)off peak utility prices.
C)operating when complementary services like transportation are unavailable or more expensive.
D)all of the above.

Question

Quizplus · Accepted Answer

Higher capital utilization rates imply that resources are being used more intensively, which may lead to higher operating costs, maintenance costs, and faster depreciation of equipment. This, in turn, could result in a higher user cost of capital, as users may need to pay more to cover these expenses. Additionally, higher utilization rates may indicate that the equipment is being used during times when complementary services like transportation are unavailable or more expensive, which could further increase user costs. However, less highway congestion and off-peak utility prices do not necessarily have a direct impact on user costs of capital.

Higher Capital Utilization Rates May Raise User Costs of Capital