A technological change that raises the value of marginal product of capital _______ the rental rate of capital because the _______.
A) lowers; supply curve of capital shifts rightward
B) lowers; demand curve for capital shifts leftward
C) raises; supply curve of capital shifts leftward
D) raises; demand curve for capital shifts rightward

Question

Quizplus · Accepted Answer

A technological change that raises the value of the marginal product of capital increases the demand for capital, shifting the demand curve rightward, which in turn raises the rental rate of capital.

A Technological Change That Raises the Value of Marginal Product