Question

If the capital stock is fixed and something happens to raise the marginal product of capital (MPK) for any given quantity of capital, then the real rental price of capital will:

A. fall.
B. remain the same.
C. fall and then rise.
D. rise.

Answer 1

D. rise

Step-by-step explanation:

D. As per the study, marginal product theory suggests that, as the marginal product of capital (MPK) increases even if the capital stock is fixed or unchanged, the real rental will also be changed the same way i.e. it will rise in this given scenario.