Why the marginal return to capital might be high

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Question: Recall the concept of marginal returns to capital. When the shape of the production function is "conveniently" concave, how does this concept factor into a commercial bank manager's decision about what interest rates to charge a poor entrepreneur and a rich entrepreneur? Give two plausible scenarios where the standard prediction of interest rates for rich and poor entrepreneurs doesn't apply. Based on these two examples, explain why the marginal return to capital might be high for a rich entrepreneur and low for a poor entrepreneur.

Reference no: EM132174588

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