Use the following to answer question(s):
-(Exhibit: Marginal Revenue Product and Demand) If the product price is $2 per unit and the price of the factor of production is $20 per unit, the profit-maximizing quantity of the factor is _______ units.
A) 2
B) 4
C) 6
D) 8

Question

Use the following to answer question(s):  
-(Exhibit: Marginal Revenue Product and Demand) If the product price is $2 per unit and the price of the factor of production is $20 per unit, the profit-maximizing quantity of the factor is _______ units.
A) 2 
B) 4 
C) 6 
D) 8

Quizplus · Accepted Answer

To determine the profit-maximizing quantity of the factor, we need to find the point where Marginal Revenue Product (MRP) equals the price of the factor (MFC). From the exhibit, at a product price of $2 per unit, the MRP is $8 when the quantity of the factor is 6 units. At this point, MRP = MFC ($8 = $20/2), which means the firm is maximizing its profit. Therefore, the best choice is C, 6 units.

Use the Following to Answer Question(s)