The profit-maximizing rule for employment of a variable input in a monopsonistic input market is to employ that input until:
A) its marginal revenue product is equal to the marginal cost.
B) its net marginal revenue is equal to the marginal cost.
C) its marginal revenue product is greater than the marginal cost.
D) its net marginal revenue is greater than the marginal cost.
E) its marginal revenue product is less than the marginal cost.

Question

Quizplus · Accepted Answer

The profit-maximizing rule for employing a variable input in a monopsonistic input market is to continue employing that input until its marginal revenue product (MRP) is equal to the marginal cost (MC) of employing one more unit of the input. This ensures that the firm is maximizing its profit by equating the additional revenue generated from employing one more unit of the input to the additional cost of employing that unit.

The Profit-Maximizing Rule for Employment of a Variable Input in a Monopsonistic