The purely competitive employer of resource A will maximize the profits from A by equating the
A)price of A with the MRP of A.
B)marginal productivity of A with the MRC of A.
C)marginal productivity of A with the price of A.
D)price of A with the MRC of A.

Question

Quizplus · Accepted Answer

The purely competitive employer will maximize profits from a resource (A in this case) by equating the price of A with its Marginal Revenue Product (MRP). This is because, in a competitive market, the price of the resource reflects the value of the marginal product, and profit maximization occurs when the cost of the resource (its price) equals the additional revenue generated by employing one more unit of the resource (MRP).

The Purely Competitive Employer of Resource a Will Maximize the Profits