Marginal Product of Capital

The Marginal Product of Capital (MPK) refers to the additional output or production gained from investing one more unit of capital, such as machinery or equipment, while keeping other factors constant. It measures how effectively extra capital contributes to increasing overall productivity. For example, adding another machine to a factory might produce more goods, but the extra output per machine decreases as more are added. MPK helps businesses decide how much capital to invest by showing the benefit of additional capital in generating more products or services.