In a perfectly competitive resource market the Marginal Revenue Product Curve is
A) vertical.
B) horizontal.
C) downward sloping.
D) upward sloping.

Question

Quizplus · Accepted Answer

In a perfectly competitive resource market, the marginal revenue product (MRP) curve is downward sloping. This is because as the quantity of the resource increases, the marginal revenue product of each unit of the resource decreases due to diminishing marginal returns. Therefore, firms in a perfectly competitive resource market will hire resources up to the point where the MRP equals the market wage rate.

In a Perfectly Competitive Resource Market the Marginal Revenue Product