Suppose there is an increase in the demand for computers in a competitive market. Then, in computer production,

Question

Quizplus · Accepted Answer

An increase in demand for computers will lead to an increase in the price of computers (assuming supply is fixed in the short run). As a result, the marginal revenue product of computer production will increase because each additional unit of output sold will generate more revenue. The marginal product of computer production may or may not change, depending on whether the increase in demand leads to an increase in the quantity of inputs (e.g. labor, capital) used in production. However, the answer choice of "both the marginal product and the marginal revenue product will increase" is unlikely because it assumes a constant marginal cost of production, which may not be the case in reality.

Suppose There Is an Increase in the Demand for Computers