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 $60 per unit, the profit-maximizing quantity of the factor is _______ units.
A) 0
B) 2
C) 4
D) 6

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 $60 per unit, the profit-maximizing quantity of the factor is _______ units.
A) 0 
B) 2 
C) 4 
D) 6

Quizplus · Accepted Answer

To maximize profits, a firm will hire the quantity of the factor of production where the marginal revenue product (MRP) equals the price of the factor. In this case, if the product price is $2 per unit and the price of the factor is $60 per unit, we can find the MRP by referencing the exhibit. At 4 units of the factor, the MRP is $120, which is equal to the price of the factor. Therefore, the profit-maximizing quantity of the factor is 4 units.

Use the Following to Answer Question(s)