The general profit-maximizing rule for employment of a variable input is to employ that input until its marginal revenue product is equal to the marginal cost of the input, as long as:
A) the marginal cost of the input would be less than or at most equal to the marginal revenue product of the input for a greater quantity of the input.
B) the marginal cost of the input would be at least equal to or above the marginal revenue product of the input for a greater quantity of the input.
C) the marginal cost of the input would be at least equal to or below the marginal revenue product of the input for a greater quantity of the input.
D) the marginal cost of the input would be at least equal to or above the marginal revenue product of the input for a lower quantity of the input.
E) the marginal cost of the input would be at least equal to the marginal revenue product of the input for a greater quantity of the input.

Question

Quizplus · Accepted Answer

The correct choice is B because it reflects the principle that to maximize profit, a firm should continue employing additional units of a variable input until the marginal cost of the input equals the marginal revenue product. Beyond this point, if the marginal cost is higher than the marginal revenue product for additional units, employing more of the input would decrease profit.

The General Profit-Maximizing Rule for Employment of a Variable Input