Suppose a competitive industry produces output, Q, using some input, i, where the price of the output is P_Q and the input price is P_i. Efficient use of resources requires that:

Question

Quizplus · Accepted Answer

Efficient use of resources in a competitive industry requires that the marginal revenue product of the input (MRP_i) equals the input price (P_i). This ensures that the cost of the input is justified by the revenue it generates.

Suppose a Competitive Industry Produces Output, Q, Using Some Input