There may be a change in the marginal cost of capital curve when:

• A. the firm experiences economies of scale in production
• B. the firm faces different interest rates for additional borrowing
• C. the market price of the firm's product increases
• D. the firm's fixed costs decrease

Answer: (B)

Verified step by step guidance

1. Understand that the marginal cost of capital (MCC) curve represents the cost of obtaining an additional unit of capital, often influenced by the interest rate or required return on new funds.
2. Recognize that economies of scale in production affect the firm's cost structure but do not directly change the cost of capital; they primarily impact average and marginal costs of production, not financing costs.
3. Consider that if the firm faces different interest rates for additional borrowing, this directly affects the cost of obtaining new capital, causing the MCC curve to change (usually increasing as borrowing increases).
4. Note that changes in the market price of the firm's product affect revenue and potentially profits but do not directly alter the cost of capital, so the MCC curve remains unaffected by product price changes.
5. Understand that a decrease in fixed costs changes total costs but does not impact the cost of capital, so it does not cause a shift in the MCC curve.