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:

Lost Revenue

Refers to the money that a business could have earned but did not, due to various factors such as cancelled services or unsold inventory.

Profit

The financial gain obtained when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Continuous-process Production

A manufacturing method where materials are continuously fed into the process, resulting in a constant output of finished products.

Automated System

A system that operates or controls a process through the use of advanced technologies, reducing or eliminating the need for human intervention.