The following figure shows the marginal revenue product of a resource [MRP]: Figure 14.1 Assume that the resource market shown in Figure 14.1 is perfectly competitive.The MRP curve for the resource is negatively sloped because:
A)the firm can sell more units of a good only at lower prices.
B)the marginal physical product curve for the resource is negatively sloped.
C)the resource gives increasing returns as more of the resource is employed.
D)the firm hires more units of the resource at a higher price.
E)average productivity of the resource increases as more units of the resource are used.

Question

The following figure shows the marginal revenue product of a resource [MRP]: Figure 14.1  Assume that the resource market shown in Figure 14.1 is perfectly competitive.The MRP curve for the resource is negatively sloped because:
A)the firm can sell more units of a good only at lower prices. 
B)the marginal physical product curve for the resource is negatively sloped. 
C)the resource gives increasing returns as more of the resource is employed. 
D)the firm hires more units of the resource at a higher price. 
E)average productivity of the resource increases as more units of the resource are used.

Quizplus · Accepted Answer

The negative slope of the MRP curve indicates that as more units of the resource are employed, the marginal physical product (MPP) of the resource decreases. This means that each additional unit of the resource adds less to the firm's total output as more units are employed, leading to a lower willingness to pay for the resource. Therefore, choice B is the correct answer. Choices A, C, D, and E do not explain the negative slope of the MRP curve.

The Following Figure Shows the Marginal Revenue Product of a Resource