The table below shows the total output produced by different units of a resource. Assume that the resource and output markets are both perfectly competitive. The equilibrium price of the resource is $15.00, and the equilibrium price of the product is $0.50.Table 14.2
Marginal revenue product (MRP) of a resource is the product of the marginal product of the resource and the marginal revenue.
-Refer to Table 14.2. How many units of the resource will a profit-maximizing firm hire?
A)Two labor hours
B)Between two and three labor hours
C)Between three and four labor hours
D)More than four labor hours
E)Three labor hours

Question

The table below shows the total output produced by different units of a resource. Assume that the resource and output markets are both perfectly competitive. The equilibrium price of the resource is $15.00, and the equilibrium price of the product is $0.50.Table 14.2
Marginal revenue product (MRP) of a resource is the product of the marginal product of the resource and the marginal revenue. 
-Refer to Table 14.2. How many units of the resource will a profit-maximizing firm hire?
A)Two labor hours 
B)Between two and three labor hours 
C)Between three and four labor hours 
D)More than four labor hours 
E)Three labor hours

Quizplus · Accepted Answer

To determine the optimal amount of resources to hire, the firm should hire where the marginal revenue product (MRP) equals the resource price. In this case, the resource price is $15.00 and the MRP for each additional hour up to the third hour is also $15.00. The MRP for the fourth hour is only $10.00, meaning it would cost the firm more to hire an additional hour of labor than the amount of revenue it would bring in. Therefore, the profit-maximizing firm would hire between three and four labor hours.

The Table Below Shows the Total Output Produced by Different