A Technological Change That Raises the Value of Marginal Product

question 26

Multiple Choice

A technological change that raises the value of marginal product of capital ________ the rental rate for capital because the ________.

• A) raises; supply curve of capital shifts leftward
• B) lowers; supply curve of capital shifts rightward
• C) raises; demand curve for capital shifts leftward
• D) raises; demand curve for capital shifts rightward
• E) lowers; demand curve for capital shifts leftward

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Definitions:

Net Advantage to Leasing

This refers to the total financial benefits that a company might gain from leasing assets rather than purchasing them outright, taking into account tax advantages, cash flow, and risk factors.

CCA Rate

The Capital Cost Allowance (CCA) rate refers to the percentage rate at which a business can claim depreciation on certain property types for tax purposes in Canada.

Net Advantage to Leasing

This is a calculation used to determine if leasing an asset is a more cost-effective option than purchasing it outright, taking into account all the costs and benefits associated with leasing.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in an even manner.