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

-A firm will demand more units of a resource if:
A)the resource adds more to revenues than it costs.
B)the firm experiences diseconomies of scale.
C)the price of the good that uses the resource declines.
D)the resource has many substitutes.
E)the resource has few substitutes.

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 will demand more units of a resource if:
A)the resource adds more to revenues than it costs. 
B)the firm experiences diseconomies of scale. 
C)the price of the good that uses the resource declines. 
D)the resource has many substitutes. 
E)the resource has few substitutes.

Quizplus · Accepted Answer

The marginal revenue product (MRP) curve shows the additional revenue earned from hiring each additional unit of the resource. A rational firm will hire more units of a resource as long as the MRP is greater than or equal to the resource's cost, because hiring more units will increase the firm's profits. Therefore, A is the correct choice as it represents the condition that the resource adds more to revenues than it costs. B, C, D, and E do not correctly describe the conditions that would lead a firm to demand more units of a resource.

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