Asked by Luisa Zarzosa on Jul 01, 2024
Verified
Suppose XYZ Corporation is currently renting 300 units of capital at a rental price of $500 units per unit. The value of the marginal product of the 300th unit of capital is $400. How can the corporation increase its profit?
Rental Price
The cost paid periodically by a lessee to use the assets of another entity.
Marginal Product
The additional output that is produced by using one more unit of a factor of production, all other inputs remaining constant.
Profit
Total revenue minus total cost.
- Comprehend the variance between buying and leasing costs of capital through the lens of marginal product.
Verified Answer
JP
Jinal PatelJul 01, 2024
Final Answer :
In view of the fact that the VMPL of the last unit of capital rented is less than the rental price, the corporation can increase its profit by renting fewer units of capital.
Learning Objectives
- Comprehend the variance between buying and leasing costs of capital through the lens of marginal product.