A perfectly competitive firm will maximize its profits by hiring factors up to the point at which

Question

Quizplus · Accepted Answer

A perfectly competitive firm will maximize its profits by hiring factors up to the point where MRP (Marginal Revenue Product) equals MFC (Marginal Factor Cost). This is because if MRP is greater than MFC, the firm still has room to increase its profits by hiring more of that factor. If MRP is less than MFC, hiring more of that factor would result in losses. Therefore, only when MRP equals MFC will the firm maximize its profits.

A Perfectly Competitive Firm Will Maximize Its Profits by Hiring