A capital rental firm makes a profit if the ______ is ______ the cost of capital.
A) real rental price of capital; less than
B) equilibrium marginal product of capital; less than
C) equilibrium marginal product of capital; equal to
D) equilibrium marginal product of capital; greater than

Question

Quizplus · Accepted Answer

The equilibrium marginal product of capital refers to the level of output a firm can produce with the last unit of capital it acquires, and is directly related to the firm's revenue. If the equilibrium marginal product of capital is greater than the cost of capital, the firm will generate a profit by renting out the capital.

A Capital Rental Firm Makes a Profit If the ______