In general, a firm should continue to hire additional units of an input so long as the marginal revenue product of the input is greater than the marginal resource cost of the input.

Question

Quizplus · Accepted Answer

This is because the marginal revenue product (MRP) represents the additional revenue generated by employing one more unit of the input, while the marginal resource cost (MRC) represents the additional cost of employing that unit. If MRP is greater than MRC, hiring the additional unit increases the firm's profit.

In General, a Firm Should Continue to Hire Additional Units