A competitive employer will hire inputs up to the point where the
A) marginal product of the input reaches a maximum.
B) price of the input equals the price of the output.
C) price of the input equals the marginal product of the input.
D) price of the input equals the marginal revenue product of the input.

Question

Quizplus · Accepted Answer

A competitive employer will hire inputs up to the point where the price of the input equals the marginal revenue product of the input. This is because the marginal revenue product represents the additional revenue that each additional unit of input will generate, and it is a measure of the input's contribution to the firm's profits. Therefore, the employer should continue to hire inputs up to the point where the marginal revenue product equals the input's price, since this is the point where the benefit of each additional unit of input equals its cost.

A Competitive Employer Will Hire Inputs Up to the Point