A Firm Will Maximize Its Profits by Hiring Factors Up

question 145

Multiple Choice

A firm will maximize its profits by hiring factors up to the point at which

• A)MR = MC, if the firm is a monopolist, monopolistic competitor, or oligopolist.
• B)P = MC, if the firm is a perfect competitor.
• C)MRP = MFC.
• D)VMP = MFC, if the firm is a price searcher (monopolist, etc.).

Identify the relationship between marginal revenue product and firm's demand for labor and other inputs.

Describe how the concept of derived demand applies to the labor market and other factor markets.

Explain how changes in the price of resources and products affect the demand for complementary and substitute resources.

Understand the difference between marginal revenue product in perfect and imperfect competition markets.

---

Definitions:

Sales Impact

The effect of marketing and sales activities on the volume or value of product sales.

Margin of Safety

The difference between actual sales and break-even sales, indicating the extent to which sales can drop before losses occur.

Variable Costs

Costs that vary directly with the level of production or volume of output.

Fixed Costs

Expenses that do not change in proportion to the level of production or sales activity within a certain range.