Assume that an appliance manufacturer is employing variable resources X and Y in such amounts that the MRPs of the last units of X and Y employed are $100 and $60, respectively. Resource X can be hired at $50 per unit and resource Y at $20 per unit. The firm
A)should hire more of both X and Y.
B)should hire more of Y and less of X.
C)is producing with the least-costly combination of X and Y but could increase its profits by employing more of X and less of Y.
D)is using the least-costly combination of X and Y but could increase its profits by employing less of both X and Y.

Question

Quizplus · Accepted Answer

The MRP of the last unit of X is greater than its price, so the firm should hire more of X. The MRP of the last unit of Y is less than its price, so the firm should hire less of Y.

Assume That an Appliance Manufacturer Is Employing Variable Resources X