A firm will hire additional units of a resource as long as each unit's _____
A)marginal revenue product is greater than zero.
B)marginal revenue product equals the product price.
C)marginal revenue product is greater than or equal to its marginal resource cost.
D)marginal revenue product is less than its marginal resource cost.
E)total revenue product is greater than its marginal resource cost.

Question

Quizplus · Accepted Answer

A firm will hire additional units of a resource as long as the marginal revenue product is greater than or equal to its marginal resource cost. This ensures that the firm is generating enough extra revenue from the additional unit of resource to cover the cost of hiring that unit. If the marginal revenue product is less than the marginal resource cost, then hiring an additional unit would result in a net loss for the firm. Therefore, choice C is the best answer.

A Firm Will Hire Additional Units of a Resource as Long