The Demand for Capital Is Similar to the Demand for Labor

question 232

Multiple Choice

The demand for capital is similar to the demand for labor in that

• A)the marginal product of labor is derived from the marginal product of capital.
• B)the marginal revenue product curve for labor is the same as the marginal revenue product curve for capital.
• C)both are derived demands.
• D)both are inelastic at high prices and elastic at low prices.

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Definitions:

Interest Rates

The cost of borrowing money or the return on invested funds, typically expressed as a percentage of the principal amount per year.

User Cost

The cost associated with the use of a product or service, including purchase cost, maintenance, and operating expenses, as well as opportunity costs.

Extraction Cost

The expenses associated with the removal of raw materials or resources from their natural setting, which can include labor, equipment, and operational costs.

User Cost

The cost associated with using a capital asset, considering both the depreciation of the asset and the foregone interest that could have been earned by investing funds elsewhere.