A firm that wishes to maximize profits will continue to purchase capital goods until the

Question

Quizplus · Accepted Answer

The real rental price of capital is equal to the nominal rental price of capital adjusted for inflation, while MPK is the productivity of the last unit of capital. To maximize profits, a firm will continue to purchase capital goods until the real rental price of capital is equal to the marginal product of capital (MPK), as any additional unit of capital purchased would not generate more profits than its cost.

A Firm That Wishes to Maximize Profits Will Continue to Purchase