If the value of the marginal product of factor x increases as the quantity of x increases and the value of the marginal product of x is equal to the wage rate, then the profit-maximizing amount of x is being used.

Question

Quizplus · Accepted Answer

The value of the marginal product of factor x increasing as the quantity of x increases indicates increasing returns to the factor, which suggests that more of factor x could be used profitably until the value of the marginal product equals the wage rate. If it already equals the wage rate but is increasing with more of x, this implies not yet reaching the profit-maximizing amount of x.

If the Value of the Marginal Product of Factor X