Practice Quiz

AP Microeconomics

Category - Microeconomics

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Mike is selling his coffee under perfect competition. If this is the case, which of the following equations would yield marginal revenue product of labor while producing his coffee (notated in the equations as Y)?
  1. MPl x Py
  2. MPl ÷ Py
  3. MRC x Py
  4. MPl x MRC
Explanation
Answer - A - If Mike is selling his coffee under perfect competition, the equation MPl x Py would yield the marginal revenue product of labor while producing his coffee.

Key Takeaway: The marginal revenue product is simply the addition that one more unit of a resource would bring to a business’s revenue. To find the marginal revenue product (MRP), you always multiply the marginal product of the resource being discussed (in this case, labor) by the price of the resource. In this case, the only equation that works is choice A.
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