Profit maximization implies that firms will want to ________.
A)accumulate capital while the MPK is greater than the real wage
B)accumulate capital while the MPK is greater than the rental price of capital
C)accumulate labor while the MPK is greater than the rental price of capital
D)accumulate labor while the MPK is greater than the real wage
E)none of the above

Question

Quizplus · Accepted Answer

Profit maximization requires firms to allocate resources in a way that generates the largest possible profit, which is achieved when the marginal productivity of capital (MPK) equals the rental price of capital. This implies that firms will want to accumulate capital as long as the MPK is greater than the rental price of capital.

Profit Maximization Implies That Firms Will Want to ________