Consider a Firm's Demand for a Factor of Production

question 32

Multiple Choice

Consider a firm's demand for a factor of production.A perfectly competitive firm will continue to increase production until the marginal cost of the variable factor is

• A)greater than the marginal revenue of the firm's output.
• B)less than the marginal revenue of the firm's output.
• C)equal to zero.
• D)equal to the marginal revenue product of the factor.
• E)equal to the marginal revenue of the firm's output.

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Definitions:

Output

The amount of products or services produced by a company, industry, or economy in a specified period.

Labor Demand Curve

A graphical representation showing the relationship between the wage rate and the quantity of labor employers are willing to hire.

Diminishing Returns

A principle stating that if one input in the production of a commodity is increased while other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.

Imperfectly Competitive

A market structure characterized by many producers that have some control over the prices they charge, but where no single firm dominates the market.