The following table shows the total output produced by different units of a resource.Assume that the resource and output markets are both perfectly competitive.The equilibrium price of the resource is $15.00,and the equilibrium price of the product is $0.50. Table 14.2
Marginal revenue product (MRP) of a resource is the product of the marginal product of the resource and the marginal revenue.
Refer to Table 14.2.What is the marginal-revenue product of the third unit of the resource?
A)$6.50
B)$13.00
C)$17.50
D)$70.00
E)$20.00

Question

The following table shows the total output produced by different units of a resource.Assume that the resource and output markets are both perfectly competitive.The equilibrium price of the resource is $15.00,and the equilibrium price of the product is $0.50. Table 14.2
 Marginal revenue product (MRP) of a resource is the product of the marginal product of the resource and the marginal revenue.
Refer to Table 14.2.What is the marginal-revenue product of the third unit of the resource?
A)$6.50 
B)$13.00 
C)$17.50 
D)$70.00 
E)$20.00

Quizplus · Accepted Answer

The marginal product of the third unit of the resource is 10. 
The marginal revenue is $0.50. 
Therefore, the marginal-revenue product of the third unit of the resource is: 
MRP = 10 x $0.50 = $5. 
However, since the equilibrium price of the resource is $15, we can assume that the marginal-revenue product is equal to the equilibrium price. 
Therefore, the marginal-revenue product of the third unit of the resource is $15.00. 
The best choice is to produce the third unit of the resource, as its MRP is the highest among all units.

The Following Table Shows the Total Output Produced by Different