A profit-maximizing firm employs resources to the point where
A)MRC = MP.
B)resource price equals product price.
C)MRP = MRC.
D)MP = product price.

Question

Quizplus · Accepted Answer

The correct answer is C) MRP = MRC, which stands for Marginal Revenue Product equals Marginal Resource Cost. This principle is used by profit-maximizing firms to determine the optimal level of resource employment, ensuring that the cost of the last unit of resource employed is equal to the revenue generated by that unit.

A Profit-Maximizing Firm Employs Resources to the Point Where