If the firm's marginal physical product is 8, and its handicrafts sell for $70, at a labor cost of $150, the firm is operating
A)short of an optimal input point.
B)at the optimum input point.
C)beyond the optimum input point.
D)There isn't enough information to determine if the input point is optimal.

Question

Quizplus · Accepted Answer

The firm is operating short of an optimal input point because the value of the marginal product (8 * $70 = $560) is greater than the labor cost ($150), indicating that hiring more labor would increase profits.

If the Firm's Marginal Physical Product Is 8, and Its