Once the marginal product of capital is equal to the real rental cost of capital ________.
A)inventories will stabilize
B)depreciation will equal the marginal rate of substitution
C)the economy will reach full employment
D)a profit-seeking firm will stop acquiring capital

Question

Quizplus · Accepted Answer

At the point where the marginal product of capital equals the real rental cost of capital, a profit-maximizing firm will stop acquiring capital because the additional benefit from acquiring more capital is just equal to the additional cost of renting the capital. Therefore, the firm will not be able to increase its profits further by acquiring additional capital.

Once the Marginal Product of Capital Is Equal to the Real