The Equation $M P K = R - \left( \Delta p _ { k } / p _ { k } \right)$

question 82

Multiple Choice

The equation $M P K = R - \left( \Delta p _ { k } / p _ { k } \right)$ :

• A) is the capital arbitrage equation
• B) states that a firm should invest in new capital until the marginal product of capital is equal to the difference between the real interest rate and the growth rate of the price of capital
• C) states that if the real interest rate is zero, arbitrage equation states the marginal product of capital is equal to minus the capital gain
• D) states that if a firm has "too much" capital, it should divest of some of its capital stock
• E) All of these answers are correct.

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Definitions:

Gross Method

An accounting practice where purchases are recorded at their gross price without deducting any cash discounts at the time of purchase.

Perpetual Inventory System

An accounting technique that utilizes computerized point-of-sale systems and enterprise asset management software to immediately record inventory transactions upon sale or purchase.

Merchandise

Goods or products that are bought and sold in retail or wholesale in the business.

Sales Discounts

Reductions in the selling price offered to customers, often as an incentive to encourage prompt payment.