In a free market, a given unit of an input will be used by the firm that
A)earns the largest addition to total profit from the use of that unit of input.
B)has the lowest marginal cost of producing another unit of output.
C)sells its output for the highest price.
D)earns the largest total profit.

Question

Quizplus · Accepted Answer

In a free market, firms are profit-maximizers and will use an input as long as it increases their total profit. Therefore, the firm that earns the largest addition to total profit from the use of that unit of input will be the one to use it.

In a Free Market, a Given Unit of an Input