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The Equation

Question 17

Multiple Choice

The equation The equation   : A) is the capital arbitrage equation. B) states that a firm should invest in new capital until the marginal product of capital is equal to the difference between the real interest rate and the growth rate the price of capital. C) states that if the real interest rate is zero,arbitrage equation states the marginal product of capital is equal to minus the capital gain. D) states that if a firm has  too much  capital,it should divest of some of its capital stock. E) all of the above
:


A) is the capital arbitrage equation.
B) states that a firm should invest in new capital until the marginal product of capital is equal to the difference between the real interest rate and the growth rate the price of capital.
C) states that if the real interest rate is zero,arbitrage equation states the marginal product of capital is equal to minus the capital gain.
D) states that if a firm has "too much" capital,it should divest of some of its capital stock.
E) all of the above

Correct Answer:

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