Asked by Jillian Hearne on May 30, 2024
Verified
Assume that an appliance manufacturer is employing variable resources X and Y in such amounts that the MRPs of the last units of X and Y employed are $50 and $90, respectively. Resource X can be hired at $100 per unit and resource Y at $40 per unit. The firm
A) should hire less of X and more of Y.
B) should hire more of both X and Y.
C) is producing with the least-costly combination of X and Y but could increase its profits by employing more of X and less of Y.
D) is using the least-costly combination of X and Y but could increase its profits by employing less of both X and Y.
Appliance Manufacturer
A company that produces electrical machines and devices for domestic use.
Variable Resources
Inputs or factors of production that can be adjusted in the short term to meet changes in the level of output, such as labor and raw materials.
MRPs
Marginal revenue products, a measure of the additional revenue generated by employing an additional unit of a resource or factor of production.
- Analyze the approach taken by companies to achieve a state of maximum profit through the judicious allocation of resources.
Verified Answer
MZ
michell zhengMay 31, 2024
Final Answer :
A
Explanation :
The firm should hire less of X because its cost ($100) exceeds its marginal revenue product (MRP) of $50, indicating it's not profitable to hire more of X. Conversely, it should hire more of Y because its MRP ($90) exceeds its cost ($40), indicating additional units of Y are profitable.
Learning Objectives
- Analyze the approach taken by companies to achieve a state of maximum profit through the judicious allocation of resources.