You are trying to figure out how much capacity to add to your factory.You will increase capacity as long as
A)the expected marginal product of capital is positive.
B)the expected marginal product of capital is greater than or equal to the marginal product of capital.
C)the expected marginal product of capital is greater than or equal to the expected marginal product of labor.
D)the expected marginal product of capital is greater than or equal to the user cost of capital.

Question

Quizplus · Accepted Answer

Adding capacity to the factory involves an investment in capital, which incurs a cost in terms of the user cost of capital. It makes sense to add capacity only if the expected marginal product of capital (the additional output produced by the investment in capital) is greater than or equal to the user cost of capital. This ensures that the investment generates a positive net return and contributes to the profitability of the firm.

You Are Trying to Figure Out How Much Capacity to Add