A profit-maximizing firm uses additional units of a factor of production until ________ equals _______ .

Question

Quizplus · Accepted Answer

A profit-maximizing firm will continue to use additional units of a factor of production until the marginal revenue product (MRP) equals the marginal factor cost (MFC). This is because MRP represents the additional revenue generated by using one more unit of the factor, and MFC represents the cost of using that additional unit. When they are equal, the firm is maximizing its profit.

A Profit-Maximizing Firm Uses Additional Units of a Factor of Production