Figure 7-15
-For a firm at equilibrium, at point A in Figure 7-15,
A)the price of labor is high relative to the price of machines.
B)the MPP of labor is greater than the MPP of machines.
C)the MPP of labor is less than at point B.
D)output is higher than at point B.

Question

Figure 7-15 
-For a firm at equilibrium, at point A in Figure 7-15,
A)the price of labor is high relative to the price of machines. 
B)the MPP of labor is greater than the MPP of machines. 
C)the MPP of labor is less than at point B. 
D)output is higher than at point B.

Quizplus · Accepted Answer

At equilibrium, the marginal physical product (MPP) of labor at point A would be less than at any point where more labor is used (assuming diminishing returns), such as point B. This is because as more of a variable input (like labor) is used, its marginal product typically decreases due to the law of diminishing marginal returns.

Figure 7-15 -For a Firm at Equilibrium, at Point a in Figure