Macroeconomics 12th Edition by Rudiger Dornbusch ,Stanley Fischer,Richard Startz

Exercise 7

The model of business fixed investment studied in Section 15-1 examines the benefits and costs to firms of owning capital goods. Its basic conclusion is that firms will increase their capital stock as long as the marginal product of their capital exceeds the marginal cost. What is Tobin's q , and how does it relate to the model in 15-1