Final answer:
The cost of capital in business refers to the price a business would have to pay to rent all the inputs used to produce its products. The rental rate of capital specifically refers to the cost of renting or leasing the physical capital used in the production process. In the long run, firms can choose the optimal capital stock to produce the desired level of output.
Step-by-step explanation:
The subject of this question is Business. Specifically, it pertains to the cost of capital, which is broadly defined as the price a business would have to pay to rent all the inputs used to produce its products.
The correct answer is b. Rental rate of capital. The rental rate of capital refers to the cost of renting or leasing the physical capital, such as machinery, equipment, or buildings, which are used in the production process. It is a crucial factor in determining the overall production cost.
In the long run, all inputs are variable, and firms can choose the optimal capital stock to produce their desired level of output. This concept is related to the long-run average cost (LRAC) curve, which shows the lowest possible average cost of production, allowing all inputs to vary.