User cost is equal to ________.
A)interest cost plus the expected rate of change in the real price of capital plus depreciation
B)interest cost minus the rate of depreciation
C)interest cost minus the expected rate of change of the real price of capital plus depreciation
D)interest cost plus depreciation

Question

Quizplus · Accepted Answer

User cost is the cost of owning and operating a capital asset. It includes the opportunity cost of using the capital instead of investing in other projects (interest cost), the expected rate of change in the real price of capital (a measure of how much the capital asset's value is likely to change due to technological progress or other factors), and depreciation (the decrease in value of the asset over time). Therefore, user cost is equal to the interest cost minus the expected rate of change in the real price of capital, plus depreciation.

User Cost Is Equal to ________