Firms will continue to increase their purchase of factor inputs as long as ________.
A)the marginal product of a given factor is greater than its real factor price
B)the marginal cost of a given factor is lower than its marginal product
C)their total revenues are greater than their total costs
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

Each option describes a condition under which firms would find it beneficial to increase their purchase of factor inputs: A) firms benefit from purchasing more of a factor as long as the additional output generated (marginal product) is worth more than the cost of the factor (real factor price); B) it's advantageous to buy more of a factor if the cost of the additional factor (marginal cost) is less than the value of the additional output it produces (marginal product); C) firms will generally increase production (and thus factor input purchase) as long as doing so is profitable (total revenues exceed total costs).

Firms Will Continue to Increase Their Purchase of Factor Inputs