For any firm in any market structure,a factor's marginal revenue product is
A)the average product of the factor multiplied by the price of the output.
B)the change in revenue caused by the sale of the product contributed by an additional unit of input.
C)the change in revenue caused by the sale of an additional unit of output.
D)the increase in output resulting from the use of an additional unit of the factor multiplied by the cost of that factor.
E)marginal revenue multiplied by total product.

Question

Quizplus · Accepted Answer

Marginal revenue product (MRP) is the change in revenue caused by the sale of the product contributed by an additional unit of input. This is because the MRP represents how much revenue the firm gains by producing one more unit of output with an additional unit of input, and therefore it is measured as the product of marginal product and marginal revenue (MRP = MP x MR). Choice A is incorrect because it uses average product instead of marginal product, and it only considers the price of the output rather than the change in revenue caused by an additional unit of input. Choice C is incorrect because it refers to the change in revenue caused by the sale of an additional unit of output, which is not necessarily related to the factor's contribution. Choice D is incorrect because it uses the cost of the factor instead of the marginal revenue. Choice E is incorrect because it multiplies marginal revenue by total product, which is not meaningful for measuring the contribution of a factor.

For Any Firm in Any Market Structure,a Factor's Marginal Revenue