In a purely competitive market for economic resources,a firm's marginal revenue product for a factor could decrease as a result of a(n):

Question

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In a purely competitive market for economic resources, the price of a factor of production is determined by the intersection of the demand and supply curve for that factor. A firm's marginal revenue product (MRP) is the extra revenue that a firm earns by hiring an additional unit of a factor, ceteris paribus. If there is a decrease in the demand for the firm's product, the firm's MRP curve for the factor will shift downward, indicating that the firm can now afford to pay less for that factor. This will lead to a decrease in the price of the factor, and thus a decrease in its marginal revenue product. Therefore, the correct answer is B).

In a Purely Competitive Market for Economic Resources,a Firm's Marginal