An Increase in the User Cost of Capital Leads Firms

question 36

Multiple Choice

An increase in the user cost of capital leads firms to ________ their profit by ________ their capital-output ratio.

• A)raise,increasing
• B)raise,decreasing
• C)lower,increasing
• D)lower,decreasing

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Definitions:

Positive Externalities

Benefits that result from a commercial activity or action but affect uninvolved third parties who did not choose to be involved in the transaction.

Spillover Benefits

Positive effects or advantages that result from a product, event, or activity, affecting those who are not directly involved.

Price

The total funds necessary to acquire a commodity, service, or asset.

Output

The amount of goods or services produced by a business, industry, or economy.