A Profit-Maximizing Firm Will Hire Extra Units of a Resource

question 192

Multiple Choice

A profit-maximizing firm will hire extra units of a resource when

• A)marginal resource cost exceeds marginal revenue product
• B)marginal resource cost is equal to marginal revenue product
• C)marginal resource cost is less than marginal revenue product
• D)temporary resource price differentials exceed the marginal resource cost
• E)the average resource cost and marginal resource cost curves are equal

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Definitions:

Concentration Ratio

A measure of the market share held by the largest firms within an industry, used to determine the level of competition and market structure.

Price Wars

A competitive exchange among rival companies where prices are successively lowered to undercut competitors, often leading to reduced profit margins.

ATC Curve

Average Total Cost Curve, a graphic representation that shows the cost per unit of output produced.

Barriers to Entry

Factors that make it difficult for new firms to enter a market, such as high startup costs, stringent regulations, or strong competition from existing firms.