A firm wanting to maximize profits should operate in such a way that

Question

Quizplus · Accepted Answer

In order to maximize profits, a firm should operate in such a way that the MRP (Marginal Revenue Product) of each input is equal to or greater than its MFC (Marginal Factor Cost). This means the firm would be using its resources (inputs) in the most efficient way possible, resulting in maximum profits. Option B is incorrect because while MRP and MFC are important in the input market, MC (Marginal Cost) and MR (Marginal Revenue) are important in the output market. Option C is not entirely correct as marginal revenue doesn't need to be exactly equal to MRP, rather, it needs to be greater than or equal to the Marginal Cost (MC) of producing the additional unit.

A Firm Wanting to Maximize Profits Should Operate in Such