The marginal product of capital indicates ________.Therefore the MPK curve is also ________.
A)the quantity of capital supplied for a given rental price;the equilibrium price of capital
B)the quantity of capital demanded for a given rental price;the demand curve of capital
C)the quantity of capital demanded for a given rental price;the equilibrium price of capital
D)the quantity of capital supplied for a given rental price;the supply curve of capital
E)none of the above

Question

Quizplus · Accepted Answer

The marginal product of capital reflects how much output is being produced by each additional unit of capital, holding other factors constant. Therefore, it indicates the quantity of capital demanded for a given rental price. This means that as the rental price of capital changes, the quantity of capital demanded will change as well, resulting in a demand curve of capital or an MPK curve. Choice A is incorrect because the marginal product of capital reflects demand for capital, not supply. Choice C is incorrect because it states that the MPK curve is the equilibrium price of capital, which is not accurate. Choice D is incorrect because it suggests that the marginal product of capital indicates supply when it actually reflects demand. Choice E is incorrect because one of the choices is correct.

The Marginal Product of Capital Indicates ________