The market price of physical capital is $10,and the market wage rate is $5.If a firm is optimally hiring an additional unit of physical capital,the value of the marginal product of physical capital is ________.

Question

Quizplus · Accepted Answer

The value of the marginal product of physical capital is equal to the marginal product of physical capital multiplied by the market price of physical capital. 
Assuming the marginal product of physical capital is positive, then the firm will hire an additional unit of physical capital as long as its value of marginal product is greater than or equal to its price. 
In this case, the value of the marginal product of physical capital is $10 ($10 per unit x 1 unit), which is greater than the price of physical capital at $10. Therefore, the firm will hire an additional unit of physical capital.

The Market Price of Physical Capital Is $10,and the Market