... the cost of other inputs and the price of the firms product, and 'rK' is the rental price of capital. By taking the first derivative of the above equation, the firm rents capital until its marginal revenue product equals its rental price - a balance between the return and cost of capital. However, one can extend upon this analysis by replaced the rental price of capital with the 'user cost of capital'. As most capital is not rented but is owned by firms, it is necessary to take into account the opportunity cost of the investment decision (the interest received if it didn't invest), the level of depreciation (given by the depreciation rate '?'), the changing price of capital and the tax system. However, even if one extends the analysis to take all these factors, the investment decisions is still a balance between the cost and return of capital under ...

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