Asked by Jamario Dixon on Mar 10, 2024
Verified
If a firm is hiring inputs under purely competitive conditions, then any level of output will be produced with the least-cost combination of resources A and B when
A) MU of A/price of A = MU of b/price of B.
B) MRP of A = MRP of B.
C) the price of A equals the price of B.
D) MP of A/price of A = MP of b/price of B.
Least-Cost Combination
is an economic principle where firms aim to produce a given output at the minimum possible cost by choosing the optimal combination of inputs.
Purely Competitive Conditions
Purely competitive conditions describe a market situation where numerous small firms compete against each other, selling homogeneous products, with no single firm able to influence market prices.
MU
MU typically stands for Marginal Utility, which is the additional satisfaction or utility that a consumer receives from consuming one more unit of a good or service.
- Understand the principle of utilizing resources so that the marginal output per unit of expenditure is uniformly distributed among all resources.
- Appreciate the dynamics of purely competitive markets and how they influence resource allocation and income distribution.
Verified Answer
EM
Erica McfeetersMar 10, 2024
Final Answer :
D
Explanation :
The least-cost combination of resources A and B is achieved when the marginal product per dollar spent on each resource is equalized across all resources, which is represented by MP of A/price of A = MP of B/price of B. This ensures that the firm is allocating its budget in a way that maximizes the total output derived from its inputs.
Learning Objectives
- Understand the principle of utilizing resources so that the marginal output per unit of expenditure is uniformly distributed among all resources.
- Appreciate the dynamics of purely competitive markets and how they influence resource allocation and income distribution.