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The Equation MPK=R(Δpk/pk)M P K = R - \left( \Delta p _ { k } / p _ { k } \right)

Question 20

Multiple Choice

The equation MPK=R(Δpk/pk) M P K = R - \left( \Delta p _ { k } / p _ { k } \right) :


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 of 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 these answers are correct.

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