Asked by Jaiye Otulana on Jul 05, 2024
Verified
As output rises,
A) both marginal revenue product and marginal physical product rise.
B) both marginal revenue product and marginal physical product fall.
C) marginal revenue product rises and marginal physical product falls.
D) marginal revenue product rises and marginal physical product rises.
Marginal Revenue Product
The additional revenue generated from employing one more unit of a resource, such as labor or capital.
Marginal Physical Product
The additional output that is produced by employing one more unit of an input, holding other inputs constant.
- Grasp the correlation between marginal revenue product (MRP) and the judgment to employ more resources.
- Discuss the concepts of substitution and output effects in resource employment.
Verified Answer
BZ
Benish Zubair
Jul 08, 2024
Final Answer :
B
Explanation :
As output rises, typically, both marginal revenue product (MRP) and marginal physical product (MPP) fall due to the law of diminishing returns. This principle states that as more units of a variable input (like labor) are added to fixed inputs (like capital), the additional output produced by each new unit of the variable input eventually decreases.
Learning Objectives
- Grasp the correlation between marginal revenue product (MRP) and the judgment to employ more resources.
- Discuss the concepts of substitution and output effects in resource employment.
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