A firm should consume physical capital until the value of the ________.

Question

Quizplus · Accepted Answer

The marginal product of physical capital represents the additional output produced by using one more unit of physical capital. The firm should consume physical capital until the marginal product of physical capital equals the price of physical capital, meaning that the additional revenue generated by using one more unit of physical capital is equal to the cost of purchasing and using that unit. This maximizes the firm's profit.

A Firm Should Consume Physical Capital Until the Value of the ________