Company B has just discovered that the marginal revenue product generated by the last worker hired was $25 while the marginal factor cost was $25. What should Company B do?

Question

Quizplus · Accepted Answer

Since the marginal revenue product (MRP) is equal to the marginal factor cost (MFC), it means that the company is already operating at an optimal level of production where the additional output generated by the last worker hired is equal to the cost of hiring that worker. Making any changes to the level of production would lead to a decrease in profits. Thus, it is best for Company B to leave the level of production unchanged.

Company B Has Just Discovered That the Marginal Revenue Product