Saying a Firm Will Continue Investing Up to the Point

question 83

Multiple Choice

Saying a firm will continue investing up to the point at which the marginal revenue product of capital is equal to the price of capital is equivalent to saying that a firm will keep investing in new capital up to the point where

• A) the expected rate of return is zero.
• B) economic profit is zero.
• C) the expected rate of return is equal to the interest rate.
• D) the price of capital equals the interest rate.

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Definitions:

Privity of Contract

A legal concept indicating that contracts are binding only upon the parties signing the contract, excluding any third parties.

Insurance Contract

A legally binding agreement between an insurer and the insured, outlining the terms for premium payment and the conditions under which the insurer will compensate the insured.

Goods

Tangible, movable personal property that can be measured and weighed; also known as chattels.

Non Est Factum

A plea asserting that an agreement is void because the signer was unaware of its essence due to deception or misunderstanding.