A firm will use more and more land until the marginal revenue product of land

Question

Quizplus · Accepted Answer

The marginal revenue product (MRP) of land represents the additional revenue that a firm would receive by using one more unit of land. A firm will continue to use more land as long as the MRP is greater than the cost of renting the land. However, once the MRP falls to the level of the rent, the firm would not gain any additional benefit from renting more land. In fact, it would be more profitable for the firm to use its resources elsewhere. Therefore, the correct choice is B - falls to the level of the rent.

A Firm Will Use More and More Land Until the Marginal