A firm uses two inputs, A and B.At its optimal choice of input proportions,
A)MRP of A = MRP of B.
B)MRPA/PA = MRPB/PB.
C)MPP of A = MPP of B.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

At the optimal choice of input proportions, the firm will allocate its resources so that the marginal revenue product (MRP) per dollar spent on each input is equal. This means that MRP of A/PA = MRP of B/PB. Thus, the correct answer is B: MRPA/PA = MRPB/PB.

A Firm Uses Two Inputs, a and B