If a firm is using a resource hired in a perfectly competitive market, and if the price of the resource exceeds the marginal revenue product of the resource,
A) more of the resource should be used.
B) less of the resource should be used.
C) the firm should pay a lower price for the resource.
D) the firm should pay a higher price for the resource.
E) the firm is using the optimal amount of the resource

Question

Quizplus · Accepted Answer

If the price of the resource exceeds the marginal revenue product, the firm is paying more for the resource than the revenue it generates, indicating that less of the resource should be used to maximize profit.

If a Firm Is Using a Resource Hired in a Perfectly