The optimum capital stock is achieved when the user cost of capital is equal to
An interior optimal capital stock equates the marginal product/value marginal product, in consistent real units, with the user cost of capital. Interest and depreciation are…
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The optimum capital stock is achieved when the user cost of capital is equal to
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Correct answer C
An interior optimal capital stock equates the marginal product/value marginal product, in consistent real units, with the user cost of capital. Interest and depreciation are components of user cost, not each the complete marginal benefit; Tobin's Q is a valuation ratio.
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UGC NET Economics