If MPK = r, the firm:
A) should hire more labor.
B) should hire more capital until MPK= w.
C) should hire more capital until MPK = 0.
D) should get rid of some capital until MPK = r.
E) has the optimal amount of capital.

Question

Quizplus · Accepted Answer

The equation MPK = r indicates that the marginal product of capital (MPK) equals the rate of return (r). This means the firm is utilizing its capital efficiently, achieving the optimal amount of capital.

If MPK = R, the Firm