A perfectly competitive firm is maximizing profit. If the marginal product of capital is 10 units...
Question:
A perfectly competitive firm is maximizing profit. If the marginal product of capital is 10 units and the price of the product is $5, the rental price of capital is:
a. $50
b. $25
c. $10
d. $5
e. None of the above.
Marginal Product of Capital:
Capital is one of the factors of production, as explained in economics. The marginal product of capital is the amount by which the total output increases by when the firm increases the amount of capital used by one unit.
Answer and Explanation: 1
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- The correct answer is a. $50.
The optimal level of capital that is hired by a perfectly competitive firm occurs at the point where the marginal...
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Total Product, Average Product & Marginal Product in Economics
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Chapter 4 / Lesson 2
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In Economics, there are three factors involved in the theory of production: total product, average product, and marginal product. Explore this theory and learn how to maximize the efficiency of these production tools.
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