A technological change that raises the value of marginal product of capital ________ the rental rate for capital because the ________.
A) raises; supply curve of capital shifts leftward
B) lowers; supply curve of capital shifts rightward
C) raises; demand curve for capital shifts leftward
D) raises; demand curve for capital shifts rightward
E) lowers; demand curve for capital shifts leftward

Question

Quizplus · Accepted Answer

An increase in the value of marginal product of capital will raise the demand for capital (shift the demand curve rightward), leading to an increase in the rental rate for capital.

A Technological Change That Raises the Value of Marginal Product