If the price of a resource is greater than its marginal revenue product, the firm should
A) charge a higher price for its product.
B) make no change in the units of the resource used.
C) increase the units of the resource used in order to increase profits.
D) decrease the units of the resource used in order to increase profits.

Question

Quizplus · Accepted Answer

If the price of a resource is greater than its marginal revenue product, it means the firm is paying more for the resource than it is worth in terms of the revenue it generates. Therefore, in order to increase profits, the firm should decrease the units of the resource used, as it is not generating enough additional revenue to justify its cost.

If the Price of a Resource Is Greater Than Its