If R Is the Real Interest Rate;w Is the Real

question 100

Multiple Choice

If R is the real interest rate;w is the real wage;MPK is the marginal product of capital;and MPL is the marginal product of labor,which of the following conditions informs the profit-maximizing firm how much capital to invest in?

• A)R = MPK
• B)R = w
• C)R = 0 and MPK = MPL
• D)MPK = MPL
• E)MPK > MPL if R < w

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Definitions:

Available Technology

The current state of technological advances and machinery available to businesses for production purposes.

Opportunity Cost

The cost of the next best alternative foregone when making a decision.

Production Possibilities Frontier

A graph that shows the combinations of two goods that an economy can produce using all available resources and technology efficiently.