The figure given below shows the marginal revenue product (MRP) of accountants in a firm.Figure 14.2
MRP = MP X MR

-According to Figure 14.2, the:
A)value of the resource to the firm declines after the second unit of the resource is used.
B)marginal-physical product diminishes at every resource level if we consider the product market to be competitive.
C)law of diminishing marginal product does not apply in this case.
D)optimal number of units of the resource to be used is 3.
E)optimal number of units of the resource to be used is 7.

Question

The figure given below shows the marginal revenue product (MRP) of accountants in a firm.Figure 14.2
MRP = MP X MR
 
-According to Figure 14.2, the:
A)value of the resource to the firm declines after the second unit of the resource is used. 
B)marginal-physical product diminishes at every resource level if we consider the product market to be competitive. 
C)law of diminishing marginal product does not apply in this case. 
D)optimal number of units of the resource to be used is 3. 
E)optimal number of units of the resource to be used is 7.

Quizplus · Accepted Answer

The marginal revenue product (MRP) of accountants in a firm declines after the second unit of the resource is used, indicating that the value of the resource to the firm declines as more units are used. This is consistent with the law of diminishing marginal returns, which states that as more units of a variable input (such as labor) are added to a fixed amount of other inputs (such as capital), the marginal product of the variable input will eventually decline. Choice B is incorrect because the graph does not provide information about the competitiveness of the product market. Choices C, D, and E are also incorrect because the graph does not provide enough information to determine the optimal number of units to be used.

The Figure Given Below Shows the Marginal Revenue Product (MRP)