In the Employment of Any Resource, a Firm Should

question 44

Multiple Choice

In the employment of any resource, a firm should

• A) equate marginal revenue product with the cost of the additional resource.
• B) hire each input unit that adds more to revenue than it adds to costs.
• C) hire each input unit provided its marginal physical product is greater than zero.
• D) A and B are both correct.

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Definitions:

Legal Minimum

A legally established lower threshold for payments or conditions, such as minimum wage.

Good Sold

Refers to a product that has been purchased by a buyer from a seller in a transaction.

Nonbinding Price Floor

A minimum price set by law above which the market price can lie, without any impact on the market price because the floor is set below equilibrium.

Quantity Sold

The actual number of units of a product that have been sold in the market over a specific time period, reflecting market demand.