If the capital stock is fixed and something happens to raise the marginal product of capital for any given quantity of capital, then the real rental price of capital will:
A)remain the same.
B)rise.
C)fall.
D)fall and then rise.

Question

Quizplus · Accepted Answer

An increase in the marginal product of capital means that each unit of capital is now producing more output. This will lead to an increase in the demand for capital, which will in turn drive up the real rental price of capital.

If the Capital Stock Is Fixed and Something Happens to Raise