The optimum quantity of an input occurs when
A)diminishing returns set in.
B)marginal revenue product equals input price.
C)marginal physical product equals input price.
D)marginal revenue product equals output price.

Question

Quizplus · Accepted Answer

The optimum quantity of an input occurs when the marginal revenue product (MRP) equals input price. This means that the firm is able to maximize its profits by using the input up to the point where the additional revenue generated by the input (MRP) is equal to the cost of the input (input price). At this point, further use of the input would result in diminishing returns, which would reduce the MRP below the input price, leading to a decrease in profits. Therefore, choice B is the best answer.

The Optimum Quantity of an Input Occurs When