Exhibit: Rental Price of Capital Based on the Graph

question 84

Multiple Choice

Exhibit: Rental Price of Capital Based on the graph, if the capital market is initially in equilibrium at A with real rental price R₃ / P and capital stock K₂, then holding other factors constant, an improvement in technology that increases the marginal productivity of capital will move:

• A)the demand curve from D₂ to D₁.
• B)the demand curve from D₂ to D₃.
• C)the supply of capital from K₂ to K₁.
• D)the supply of capital from K₂ to K₃.

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Definitions:

Marginal Cost

The leap in all-encompassing expenses associated with the production of an additional unit of a product or service.

Average Total Cost

The cost of producing everything, when divided by the number of units made, signifies the cost for each unit produced.

Average Variable Costs

The total variable costs of production divided by the quantity of output produced, representing the variable costs per unit of output.

Mud Statues

Sculptures made from mud or clay, often created as part of artistic or cultural traditions.