Because marginal revenue product reflects productivity, decreases in productivity directly shift
A) input supply curves to the left.
B) input demand curves to the left.
C) input supply curves to the right.
D) input demand curves to the right.

Question

Quizplus · Accepted Answer

Marginal revenue product (MRP) is a measure of the additional revenue generated by employing one more unit of a factor of production, reflecting the productivity of that factor. When productivity decreases, the value of the additional output produced by the last unit of input decreases, making firms less willing to pay for more of that input. This results in a leftward shift of the input demand curve, as firms demand less of the input at each possible price.

Because Marginal Revenue Product Reflects Productivity, Decreases in Productivity Directly