Marginal product of capital

The marginal product of capital (MPK) is the additional output resulting, ceteris paribus ('all things being equal'), from the use of an additional unit of physical capital. It equals the reciprocal of the incremental capital-output ratio. Mathematically, it is the partial derivative of the production function with respect to capital. If production output Q = f ( K , L ) {displaystyle Q=f(K,L)} , then The marginal product of capital (MPK) is the additional output resulting, ceteris paribus ('all things being equal'), from the use of an additional unit of physical capital. It equals the reciprocal of the incremental capital-output ratio. Mathematically, it is the partial derivative of the production function with respect to capital. If production output Q = f ( K , L ) {displaystyle Q=f(K,L)} , then One of the key assumptions in economics is diminishing returns, that is the marginal product of capital is positive but decreasing in the level of capital stock, or mathematically In a perfectly competitive market, the rental rate of capital (the average and marginal cost of obtaining and utilizing a machine) is set by the market process equal to the marginal product of capital.