If a firm's MPK is below its user cost of capital,it is employing too ________ capital and its profit is ________ in the long run.

Question

Quizplus · Accepted Answer

If a firm's MPK is below its user cost of capital, it implies that it is using more capital than it should be, leading to diminishing returns to capital. As a result, the profit will be lower in the long run than what it could be if the firm used the optimal amount of capital. Therefore, the best answer is D.

If a Firm's MPK Is Below Its User Cost of Capital,it