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

-A firm under any market structure maximizes profits at a point where:
A)marginal revenue product is greater than marginal factor cost.
B)marginal revenue product is equal to marginal factor cost.
C)marginal revenue product is equal to zero.
D)marginal factor cost is equal to zero.
E)marginal revenue product is less than marginal factor cost.

Question

The figure given below shows the marginal revenue product (MRP) of accountants in a firm.Figure 14.2
MRP = MP X MR
 
-A firm under any market structure maximizes profits at a point where:
A)marginal revenue product is greater than marginal factor cost. 
B)marginal revenue product is equal to marginal factor cost. 
C)marginal revenue product is equal to zero. 
D)marginal factor cost is equal to zero. 
E)marginal revenue product is less than marginal factor cost.

Quizplus · Accepted Answer

A firm under any market structure maximizes profits at a point where the marginal revenue product (MRP) is equal to the marginal factor cost (MFC), as long as MRP is greater than MFC. This is because at this point, the additional revenue earned from hiring one more unit of the factor (in this case, accountants) is equal to the additional cost incurred from hiring that unit. Thus, the firm is using the factor in an efficient manner and is maximizing its profits. Choice B corresponds to this condition.

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