Assume a pencil manufacturer is employing resources C and D in such quantities that the MRPs of the last units hired are $80 and $50, respectively. The price of resource C is $90, and the price of D is $35. This firm
A)should hire less of C and more of D.
B)should hire more of both C and D.
C)should hire less of both C and D.
D)is using the least-cost combination of C and D.

Question

Quizplus · Accepted Answer

The firm should hire less of C because its MRP ($80) is less than its price ($90), indicating it's not generating enough revenue to justify its cost. Conversely, it should hire more of D since its MRP ($50) is higher than its price ($35), suggesting additional units of D would generate more revenue than they cost.

Assume a Pencil Manufacturer Is Employing Resources C and D