What is the profit-maximizing condition for the use of a resource?
What will be an ideal response?
The profit-maximizing condition occurs when the marginal revenue product and the marginal resource cost are equal. When they are equal, an additional unit of the resource would cause a greater increase in cost than in revenue and a unit less would result in revenue being greater than the cost of that reduced unit, producing incentive to increase production. In both cases, costs could be minimized and revenues maximized by moving the quantity to the level where MRP=MRC, thus maximizing profit.
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Cost-plus pricing would be consistent with selecting the profit-maximizing price when
A) the demand for the firm's product is unit elastic. B) consumers value the product beyond its marginal cost. C) a firm has no difficulty estimating its demand curve. D) it results in a price that causes quantity sold to be where marginal revenue equals marginal cost.
A monopolistic competitor's demand curve tends to be more elastic than a monopolist's demand curve
a. True b. False Indicate whether the statement is true or false