Asked by Alexis Garland on Jul 23, 2024
Verified
"The firm hires the factor up to the point where the value of the factor's marginal product is equal to the factor's price." This statement applies to which factor of production?
A) Labor only
B) Land only
C) Capital only
D) Land, labor, and capital
Factor's Price
The cost of utilizing factors of production like labor, land, and capital in the process of manufacturing.
Factor's Marginal Product
The additional output that results from the use of one more unit of a production factor, holding other factors constant.
Factor Of Production
An input used in the production of goods or services, including labor, capital, land, and entrepreneurship.
- Explain how the concept of marginal product influences the determination of factor prices, encompassing rent, interest, and profit.
- Clarify the impact of diminishing returns on the marginal productivity and rental rates of factors involved in production.
Verified Answer
AF
Albert FrancisJul 30, 2024
Final Answer :
D
Explanation :
This statement applies to all factors of production: land, labor, and capital. Firms aim to hire any factor of production up to the point where the value of the factor's marginal product equals the factor's price, as this is the point of optimal use of the factor for the firm.
Learning Objectives
- Explain how the concept of marginal product influences the determination of factor prices, encompassing rent, interest, and profit.
- Clarify the impact of diminishing returns on the marginal productivity and rental rates of factors involved in production.