Asked by Riley Jackson on Jun 27, 2024
Verified
Which of the following statements is correct?
A) The market for capital is unlike the market for labor because the rental price of capital is unaffected by the marginal product of capital, whereas the price of labor is affected by the marginal product of labor.
B) The market for capital is unlike the market for labor because the purchase price of capital is unaffected by the marginal product of capital, whereas the price of labor is affected by the marginal product of labor.
C) The market for capital is like the market for labor because the rental price of capital is affected by the marginal product of capital, and the price of labor is affected by the marginal product of labor.
D) Neither the market for capital nor the market for labor is affected by the marginal product of capital or the marginal product of labor.
Rental Price
The amount of money paid periodically for the use of an asset, property, or piece of equipment.
Marginal Product
The additional output generated by employing one more unit of a particular input, holding all other inputs constant.
Market Comparison
The analysis and evaluation of a company's performance, products, or services against those of its competitors within the same industry or market.
- Understand the principle of the capital demand curve and its reflection of capital's marginal productivity.
- Describe the relationship between the marginal product concept and the establishment of factor prices, including rent, interest, and profit.
Verified Answer
SK
Shreyal KamatJun 29, 2024
Final Answer :
C
Explanation :
Both the markets for capital and labor are similar in that the prices in both markets are influenced by the marginal product. In the case of capital, the rental price is affected by its marginal product, just as the price of labor (wages) is influenced by the marginal product of labor.
Learning Objectives
- Understand the principle of the capital demand curve and its reflection of capital's marginal productivity.
- Describe the relationship between the marginal product concept and the establishment of factor prices, including rent, interest, and profit.