If a firm is using a factor of production from a perfectly competitive market at a quantity of the factor where MFC = MRP, then profit:
A) is maximized.
B) can be increased by using less of the factor.
C) can be increased by using more of the factor.
D) can be increased by decreasing the factor price.

Question

Quizplus · Accepted Answer

When a firm is using a factor of production from a perfectly competitive market at a quantity of the factor where MFC = MRP, it means that the marginal cost of producing an additional unit of output using the factor is equal to the marginal revenue generated by that additional unit of output. This is the condition for profit maximization in the short run. Therefore, the best choice is A, which states that profit is maximized. The other choices (B, C, and D) do not lead to profit maximization in this scenario.

If a Firm Is Using a Factor of Production from a Perfectly