If the marginal product of capital is greater than the rental cost of capital in terms of goods and services, then ________.
A) the firm should continue to produce using that same amount of capital.
B) the firm should add additional capital.
C) the firm should reduce the amount of capital is is using.
D) diminishing returns have been avoided

Question

Quizplus · Accepted Answer

If the marginal product of capital is greater than the rental cost of capital in terms of goods and services, it means that the addition of more capital will result in an increase in output that exceeds the cost of adding the capital. Therefore, it would be profitable for the firm to add additional capital.

If the Marginal Product of Capital Is Greater Than the Rental