In a perfectly competitive situation, the profit-maximizing hiring situation for all inputs being used is where

Question

Quizplus · Accepted Answer

In a perfectly competitive situation, each input is a price taker, meaning they have to accept the market-determined price for their services. Therefore, to maximize profits, a firm will hire each input up to the point where the marginal revenue product (MRP) of each input is equal to the price of each input. This is because hiring more of the input beyond this point would result in diminishing marginal returns and decreasing profits, while hiring less would leave some potential profits unrealized.

In a Perfectly Competitive Situation, the Profit-Maximizing Hiring Situation for All