The user cost of capital equals the:
A) the marginal cost of capital.
B) real interest rate + the depreciation rate -the capital gain.
C) nominal interest rate - the capital gain.
D) rate of inflation + the marginal product of capital.
E) initial capital stock + the stock market value.

Question

Quizplus · Accepted Answer

The user cost of capital is the cost of using or owning capital. It is equal to the real interest rate (the cost of borrowing), minus the depreciation rate (the cost of wear and tear) plus any expected capital gain (the benefit of owning). Therefore, option B is the correct answer as it correctly identifies these three factors.

The User Cost of Capital Equals The