If the Value of Marginal Product of a Factor of Production

question 41

Multiple Choice

If the value of marginal product of a factor of production exceeds the price of the factor, the

• A) firm should hire more of that factor.
• B) firm should hire less of that factor.
• C) firm is maximizing profits.
• D) firm should shut down.

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Definitions:

Market Value

The current price at which an asset or service can be bought or sold, often determined by supply and demand in the marketplace.

Balance Sheet

A financial statement that presents a company's assets, liabilities, and shareholders' equity at a specific point in time.

Accounts Receivable

Money owed to a company by its customers for goods or services delivered or used but not yet paid for.

Fees Earned

Income generated from services provided, recognized in the period in which the services are rendered.