Consider a firm's demand for a factor of production.A monopolist will continue to increase production until the marginal cost of the variable factor is
A)greater than the marginal revenue of the firm's output.
B)less than the marginal revenue of the firm's output.
C)equal to zero.
D)equal to the marginal revenue product of the factor.
E)equal to the marginal revenue of the firm's output.

Question

Quizplus · Accepted Answer

A monopolist will continue to hire units of a factor of production until the marginal revenue product of the factor is equal to the marginal cost of the factor. This is because the monopolist looks to maximize profits, and hiring the factor up until this point will maximize their profits. Therefore, the correct choice is D, where the marginal cost of the variable factor is equal to the marginal revenue product of the factor.

Consider a Firm's Demand for a Factor of Production