What Determines the Ratio of the Wage to Rental Rate

question 5

Multiple Choice

What determines the ratio of the wage to rental rate of capital in a competitive, profit-maximizing economy with constant returns to scale?

• A)the quantity of economic profits earned by firm owners
• B)the interest rate
• C)the ratio of public saving to private saving
• D)the marginal productivity of labour relative to the marginal productivity of capital

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