Which of the following indicates an input is being overused relative to the optimal level? A)MRP = P of input. B)MRP P of input. C)MRP P of output.

Question

Which of the following indicates an input is being overused relative to the optimal level?
A)MRP = P of input.
B)MRP > P of input.
C)MRP < P of input.
D)MPP > P of output.

Quizplus · Accepted Answer

When MRP (marginal revenue product) is less than the price of input, it indicates that the input is being overused relative to the optimal level. This is because MRP measures the additional revenue generated by an additional unit of input, and if the MRP is less than the price of input, it means that the revenue generated by the additional input is less than the cost of the input. As a result, using additional input beyond this point will lead to lower profits. Therefore, the optimal level of input usage is where MRP equals the price of input.

Which of the Following Indicates an Input Is Being Overused