For the profit-maximizing firm, if the real interest rate is less than the marginal product of capital, the firm should invest in more capital.

Question

Quizplus · Accepted Answer

If the real interest rate is less than the marginal product of capital, it means that the rate at which the firm can borrow money is cheaper than the rate at which the capital will generate additional revenue. Therefore, it would be profitable for the firm to invest in more capital to increase its output and profits.

For the Profit-Maximizing Firm, If the Real Interest Rate Is