Question

If for a firm MRP > MFC, then the firm:

a. is maximizing profits and should continue producing its current output.
b. is maximizing factor costs and therefore is maximizing profits.
c. should produce more output by increasing the quantity of factors employed.
d. should produce less output by decreasing the quantity of factors employed

Thank you for using the Jiskha Homework Help Forum. Although this is not my area, the following sites may help you with The Labor Market:

1. www.econ.iastate.edu/classes/econ101/Herriges/

2. (Broken Link Removed)

3.
cwx.prenhall.com/bookbind/pubbooks/millerecon_ca/chap.

P.S.

1. http://en.wikipedia.org/wiki/Microeconomics (good definition of microeconomics)

2. http://www.collegeboard.com/student/testing/clep/ex_pmic.html (from the College Board, information about the AP Exam)

3. http://economics.about.com/od/microeconomics/a/micro_text.htm (online textbook)

4.

And, I would add, do a little research, think the problem through, then take a shot. Hint: a firm maximized profits when MRP=MFC. Since MRP>MFC, you can eliminate answers a and b. Take it from here.

Answer 1

c. should produce more output by increasing the quantity of factors employed.