If a firm's expected marginal product of capital exceeds its tax-adjusted user cost of capital,the firm will

Question

Quizplus · Accepted Answer

If a firm's expected marginal product of capital exceeds its tax-adjusted user cost of capital, it means that the return on investment is higher than the cost of borrowing or purchasing capital goods. Thus, it makes sense for the firm to increase its investment spending on capital goods, as this will increase its output and profits.

If a Firm's Expected Marginal Product of Capital Exceeds Its