If R Is the Real Interest Rate, W Is the Real

question 34

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?

• 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:

Assets Turnover

A financial ratio that measures the efficiency with which a company uses its assets to generate sales.

Sales

The activities involved in selling products or services to customers, encompassing strategies and processes for identifying customer needs, closing deals, and after-sales support.

Inventories

Quantities of goods or materials on hand or in process of manufacture, storage, or transport.

Asset Turnover

Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue.