If the marginal product of capital is greater than the rental cost of capital in terms of goods and services,then ________.
A)the firm should continue to produce using that same amount of capital
B)the firm should add additional capital
C)the firm should reduce the amount of capital is using
D)diminishing returns have been avoided

Question

Quizplus · Accepted Answer

If the marginal product of capital is greater than the rental cost of capital in terms of goods and services, it means that the firm can make more output for the same cost or can reduce its cost for the same output by adding additional capital. Therefore, the best choice is to add additional capital to increase output and reduce cost.

If the Marginal Product of Capital Is Greater Than the Rental