Asked by Kylyah Mercurius on Jun 22, 2024
Verified
A firm will only invest when the marginal revenue product of capital is less than its rental cost.
Marginal Revenue Product
The additional revenue generated from employing one more unit of a relevant resource or factor of production.
Rental Cost
The expense incurred from hiring or leasing a property or equipment.
- Comprehend the importance of the expected rate of return when selecting investments and its correlation with interest rates.
Verified Answer
HK
Hardeep KharoudJun 25, 2024
Final Answer :
False
Explanation :
A firm is more likely to invest when the marginal revenue product of capital is greater than its rental cost, as this indicates that the additional revenue generated by the last unit of capital exceeds its cost, making the investment profitable.
Learning Objectives
- Comprehend the importance of the expected rate of return when selecting investments and its correlation with interest rates.