If a Firm Is Using a Resource Hired in a Perfectly

question 117

Multiple Choice

If a firm is using a resource hired in a perfectly competitive market, and if the marginal resource cost is less than its marginal revenue product,

• A) more of the resource should be used.
• B) less of the resource should be used.
• C) the firm should pay a lower price for the resource.
• D) the firm should pay a higher price for the resource.
• E) the firm is using the optimal amount of the resource.

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Definitions:

Average Fixed Cost

The fixed costs of production (such as rent and salaries) divided by the number of goods produced; it decreases as output increases.

Mixers

Devices or software used for blending different audio signals together, often used in music production, live performances, and broadcasting.

Cakes

Baked dessert items typically made from ingredients like flour, sugar, eggs, and butter.

Average Fixed Cost

The total fixed costs of production divided by the quantity of output produced, decreasing as quantity increases.