Which one of the following statements about the implicit rental rate of capital is true?
A)It is the market value of capital.
B)It is the opportunity cost to a firm of using its own capital.
C)It includes normal profit.
D)It is the amount paid for the use of land or buildings.
E)It is the depreciated value of capital.

Question

Quizplus · Accepted Answer

The implicit rental rate of capital is the opportunity cost to a firm of using its own capital. This is because if a firm uses its own capital for a project, it is forgoing the opportunity to invest that capital elsewhere and earn a return on it. The implicit rental rate is not the market value of capital (A), which is the price at which capital can be bought and sold. It also does not include normal profit (C), which is a return on entrepreneurship and is separate from the return on capital. It is not the amount paid for the use of land or buildings (D), which is rent. Finally, it is not the depreciated value of capital (E), which is just the decrease in the value of capital due to wear and tear over time.

Which One of the Following Statements About the Implicit Rental