Firms will employ an input up to the point where
A) the wage rate equals the productivity of capital.
B) its marginal cost equals its marginal product.
C) the input's price equals its marginal revenue product.
D) the input's price equals its marginal product.

Question

Quizplus · Accepted Answer

Firms will continue to employ an additional unit of an input as long as the revenue generated by that additional unit (marginal revenue product) is at least equal to the cost of employing the input (its price). This ensures that the firm is maximizing profit by equating the input cost with the additional revenue generated by that input.

Firms Will Employ an Input Up to the Point Where