Firms should hire additional units of a resource as long as the:

Question

Quizplus · Accepted Answer

Firms should hire additional units of a resource as long as the marginal revenue product (MRP) of the resource is greater than or equal to the cost of hiring an additional unit. This ensures that the firm is maximizing profits by producing where the marginal benefit (MRP) equals the marginal cost (the cost of hiring an additional unit). Option A is incorrect because it compares the marginal product to the total cost (price of the resource multiplied by the quantity of output produced) instead of the marginal cost (price of the resource). Option B is incorrect because it suggests that firms should always hire a resource even if it costs more than the benefit it provides. Option C is incorrect because it only considers the price of output and not the cost of the resource.

Firms Should Hire Additional Units of a Resource as Long