When the marginal revenue product of an input is less than its price, the
A) producer should expand the use of that input.
B) price of the input will automatically rise in a free market.
C) producer should reduce the use of that input.
D) marginal physical product of that input must be below its average physical product.

Question

Quizplus · Accepted Answer

When the marginal revenue product (MRP) of an input is less than its price, it means the input is not generating enough revenue to justify its cost. Therefore, the producer should reduce the use of that input to maximize profit.

When the Marginal Revenue Product of an Input Is Less