The following table shows total output produced by different units of capital.Table 14.3
The marginal revenue product of a resource is the product of the marginal product of the resource and the marginal revenue.
-Consider a perfectly competitive firm that produces computers. Each additional worker at this firm can produce four computers. Calculate the marginal factor cost if the computers are sold for $1,000 each, and the firm is maximizing profit. (Assume that marginal revenue product is the product of marginal product of the input and the marginal revenue of the firm.)
A)$4,000
B)$500
C)$1,000
D)$1,500
E)$400

Question

The following table shows total output produced by different units of capital.Table 14.3
The marginal revenue product of a resource is the product of the marginal product of the resource and the marginal revenue. 
-Consider a perfectly competitive firm that produces computers. Each additional worker at this firm can produce four computers. Calculate the marginal factor cost if the computers are sold for $1,000 each, and the firm is maximizing profit. (Assume that marginal revenue product is the product of marginal product of the input and the marginal revenue of the firm.)
A)$4,000 
B)$500 
C)$1,000 
D)$1,500 
E)$400

Quizplus · Accepted Answer

The marginal factor cost (MFC) is the cost of the additional input required to produce one more unit of output. In a perfectly competitive market, the price of the product equals the marginal revenue (MR). Since each computer sells for $1,000 and each worker can produce 4 computers, the marginal revenue product (MRP) is 4 computers * $1,000 = $4,000. In a profit-maximizing scenario, the firm hires workers until MRP equals the wage rate, which is also the MFC in this context. Therefore, the MFC is $4,000.

The Following Table Shows Total Output Produced by Different Units