A firm is in equilibrium when the marginal factor cost is:
A) less than the price of the factor.
B) greater than the average product.
C) equal to the average product.
D) equal to the marginal revenue product.

Question

Quizplus · Accepted Answer

The firm will hire additional units of a factor of production only if its marginal revenue product is greater than or equal to the factor's price. Therefore, at equilibrium, the marginal factor cost should be equal to the marginal revenue product to maximize profits.

A Firm Is in Equilibrium When the Marginal Factor Cost