In the long run, the:

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Quizplus · Accepted Answer

In the long run, the marginal product of capital equals the real interest rate. This is because in the long run, profits in a competitive market must be equal to the return on capital. So, if the marginal product of capital is greater than the real interest rate, there is an incentive for firms to invest more, which will increase the supply of capital and lower the return on capital. Conversely, if the marginal product of capital is less than the real interest rate, there is a disincentive for firms to invest, which will decrease the supply of capital and raise the return on capital. Therefore, in the long run, the marginal product of capital and the real interest rate must be equal.

In the Long Run, The