The profit-maximizing rule for employment of a variable input is to employ that input until its marginal revenue product is equal to the marginal cost of the input, as long as the marginal cost of the input would be at least equal to or above the marginal revenue product of the input for a greater quantity of the input.

Question

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This statement accurately represents the profit-maximizing rule for employment of a variable input. The marginal revenue product (MRP) is the additional revenue earned from each additional unit of the input, and the marginal cost (MC) is the additional cost incurred from each additional unit of the input. The firm will continue to hire more of the input as long as MRP is greater than or equal to MC, but will stop hiring additional units when MRP is less than MC. This is because the firm will not earn additional profits from hiring more of the input if the cost is greater than the revenue generated.

The Profit-Maximizing Rule for Employment of a Variable Input Is