📚 Learning Guide
Resource Allocation for Profit Maximization
hard

Arrange the following steps in the correct order for optimizing resource allocation for profit maximization in a firm:

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Learning Path
Learning Path

Question & Answer
1
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2
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3
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4
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Choose the Best Answer

A

Calculate the marginal revenue product (MRP) of labor and capital.

B

Compare the ratio of MRP of labor to its wage with the ratio of MRP of capital to its price.

C

Adjust resource allocation based on the comparison results.

D

Assess changes in output levels and overall profitability.

Understanding the Answer

Let's break down why this is correct

Answer

To optimize resource allocation for profit maximization in a firm, the first step is to assess the current resources and their usage. This means looking at what resources are available, like money, materials, and labor, and how effectively they are being used. Next, the firm should analyze the costs and benefits of each resource to identify which ones contribute the most to profit. After that, the firm can reallocate resources to the areas that provide the highest returns, ensuring that every resource is used efficiently. For example, if a company finds that investing more in marketing leads to higher sales, it can shift some budget from less effective areas to marketing to maximize profits.

Detailed Explanation

First, you need to find out how much extra money each worker and machine makes. Other options are incorrect because This step comes after calculating MRP; You need to compare the MRP ratios before making changes.

Key Concepts

Marginal Revenue Product
Resource Allocation
Profit Maximization
Topic

Resource Allocation for Profit Maximization

Difficulty

hard level question

Cognitive Level

understand

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