Why Does the Marginal Revenue Product (MRP) Curve Slope Downward

question 97

Multiple Choice

Why does the marginal revenue product (MRP) curve slope downward for a perfectly competitive firm?

• A)Because MRP = MR x MPP.After some point, as more of a factor is employed, the lower its MPP is; thus MRP declines.
• B)Because MRP = MFC x MPP.After some point, as more of a factor is employed, the lower its MFC is; thus MRP declines.
• C)Because MRP = MR x MPP.After some point, MR declines for a product price taker; thus, MRP declines.
• D)Because MRP = MFC x MR.After some point, MFC and MR decline; thus, MRP declines.

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Definitions:

Prisoners' Dilemma

A situation in game theory where two individuals acting in their own self-interest do not produce the optimal outcome for either party.

Optimal Behavior

Actions or decisions that maximize the benefit or utility to an individual or entity under given constraints.

Payoff Matrix

A table that shows the potential outcomes of different strategies in a competitive situation, typically used in game theory.

Strategic Choice

The decision-making process in the context of strategic management, where leaders select the best course of action to achieve organizational goals.