A profit-maximizing firm will use additional units of resources for production until
A)total, average, and marginal cost are equal.
B)total, average, and marginal revenue are equal.
C)the marginal revenue product equals the marginal resource cost.
D)the marginal revenue product is greater than the marginal resource cost.

Question

Quizplus · Accepted Answer

A profit-maximizing firm will continue to use additional units of resources as long as the marginal revenue product (MRP), which is the additional revenue generated from using one more unit of a resource, equals the marginal resource cost (MRC), which is the additional cost of using one more unit of a resource. This principle ensures that the firm is maximizing its profits by equating the additional revenue from resource use to its additional cost.

A Profit-Maximizing Firm Will Use Additional Units of Resources for Production