If a firm is using a factor of production from a perfectly competitive market such that MFC

Question

If a firm is using a factor of production from a perfectly competitive market such that MFC < MRP, then profit:
A) is maximized.
B) can be increased by using less of the factor.
C) can be increased by using more of the factor.
D) can be increased by increasing the factor price.

Quizplus · Accepted Answer

When the Marginal Factor Cost (MFC) is less than the Marginal Revenue Product (MRP), it means that the additional cost of using one more unit of the factor of production is less than the additional revenue generated by that unit. Therefore, profits can be increased by using more of that factor until MFC equals MRP.

If a Firm Is Using a Factor of Production from a Perfectly