Where Should a Producer Stop Devoting More of His Spending

question 24

Multiple Choice

Where should a producer stop devoting more of his spending on labor if initially the MRP of the additional dollar spent on labor is higher than the MRP of the additional unit spent on tools?

• A)MRP/$ of additional labor falls below MRP/$ of additional tools.
• B)MRP/$ of additional capital increases above MRP/$ of additional tools.
• C)MRP/$ of additional labor becomes equal to MRP/$ of additional tools.
• D)MRP/$ of the additional labor falls to zero.

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Definitions:

Marginal Revenue

The increase in revenue that results from selling one additional unit of a product or service.

Demand Curve

A graph showing the relationship between the price of a good and the amount of that good that consumers are willing to purchase at various prices.

Elastic Segment

A portion of the demand curve where consumers are highly responsive to changes in price, indicating elasticity.

Total Revenue

The total amount of money received by a company for goods sold or services provided during a specific period.