The Arbitrage Condition for Capital Demonstrates That Under Profit-Maximizing Conditions

question 106

Multiple Choice

The arbitrage condition for capital demonstrates that under profit-maximizing conditions:

• A) returns to a bank account are equal to the return to capital.
• B) returns to a bank account are equal to the user cost of capital.
• C) if taxes are zero, profits are maximized.
• D) profit maximizing will yield the optimal amount of capital a firm should buy.
• E) the user cost is less than the marginal product of capital.

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Definitions:

Habituation

The method through which a living being reduces or stops its reactions to a constant stimulus over a period.

Behavioral Contrast

The change in the intensity or rate of a specific behavior when the reward conditions for another behavior are modified, demonstrating how reinforcement can influence behavioral patterns divergently.

Habituation

The process by which there is a decrease in response to a stimulus after repeated exposures, indicating a form of learning or adaptation.

Sensitization

An increased response to a stimulus following repeated exposures, typically leading to an exaggerated reaction over time.