Assuming an interior solution, a production plan is profit maximizing if and only if all marginal revenue products are equal to input prices.

Question

Quizplus · Accepted Answer

This statement is true according to the first-order condition of profit maximization in a production plan, which states that the profit-maximizing level of inputs is reached when the marginal revenue product of each input is equal to its price. If an interior solution exists (i.e., marginal products are positive), then this condition ensures that the firm is maximizing profit.

Assuming an Interior Solution, a Production Plan Is Profit Maximizing