Explain what the profit-maximizing combination of resources is for the perfectly competitive firm
What will be an ideal response?
The firm hires each input such that the marginal revenue product of the input equals the price of the input. This can also be expressed as: (MRP of labor/Price of labor) = (MRP of capital/Price of capital) = (MRP of land/Price of land), and so on.
You might also like to view...
If a bank's desired reserve-deposit ratio is 0.33 and it has deposit liabilities of $100 million and reserves of $50 million, it:
A. has the correct amount of reserves and outstanding loans. B. has too few reserves and will reduce its lending. C. has too many reserves and will increase its lending. D. should increase the amount of its reserves.
A supply factor in economic growth would be:
A. an increase in consumption spending. B. a rise in the rate of resource depletion. C. an increase in the quantity of labor. D. a fall in the efficient use of resources.
In a perfectly competitive labor market, the wage rate paid by the individual firm is
A) the equilibrium market wage rate. B) dependent on the demand for the product. C) below the equilibrium market wage rate. D) a function of the tax system.
For a commodity to function effectively as money it must be
A) easily standardized, making it easy to ascertain its value. B) difficult to make change. C) deteriorate quickly so that its supply does not become too large. D) hard to carry around.