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-(Exhibit: Rental Price of Capital) Based on the graph,if the capital market is initially in equilibrium at A with real rental price R₃/P and capital stock K₂,then holding other factors constant,an increase in the quantity of labour employed will move the real rental price of capital to:

Question

Use the following to answer questions :

-(Exhibit: Rental Price of Capital) Based on the graph,if the capital market is initially in equilibrium at A with real rental price R₃/P and capital stock K₂,then holding other factors constant,an increase in the quantity of labour employed will move the real rental price of capital to:

Quizplus · Accepted Answer

According to the graph, an increase in the quantity of labor employed shifts the demand curve for capital to the right (D2). This results in a new equilibrium point at point B, where the real rental price of capital is R₂/P. Therefore, the correct answer is B.

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