A rule of thumb in the employment of resources is to set

Question

Quizplus · Accepted Answer

Setting marginal revenue product (MRP) equal to marginal factor cost (MFC) ensures that the additional revenue generated by the use of an additional resource equals the cost of employing that resource. This rule of thumb allows firms to maximize their profits by efficiently allocating their resources. Option B is incorrect because marginal revenue (MR) refers to the additional revenue generated by selling one extra unit of output, while marginal cost (MC) refers to the additional cost of producing one extra unit of output. Option C is incorrect because marginal physical product (MPP) refers to the additional output generated by using one more unit of a resource, while marginal resource cost (MRC) refers to the additional cost of employing one more unit of a resource.

A Rule of Thumb in the Employment of Resources Is