Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The ratio of MRP of labor to wage equals the ratio of MRP of capital to price
B
The MRP of labor must always be greater than the MRP of capital
C
Resources should only be allocated to labor regardless of productivity
D
Firms should ignore the costs of capital when making resource decisions
Understanding the Answer
Let's break down why this is correct
Answer
When a firm allocates resources for profit maximization, it must ensure that it uses its resources in the most efficient way possible. This means that the firm should invest in areas that will generate the highest returns, such as marketing, production, or research and development. For example, if a company finds that spending more on advertising leads to significantly more sales, it should allocate more money to that advertising budget. Additionally, the firm should regularly review and adjust its resource allocation based on changing market conditions and performance results. By focusing on efficiency and adaptability, a firm can maximize its profits over time.
Detailed Explanation
A firm should compare the value of what it gets from labor and capital to what it pays. Other options are incorrect because Some might think labor is always more valuable than capital; It's a mistake to only focus on labor without considering how well it works.
Key Concepts
Resource Allocation for Profit Maximization
Marginal Revenue Product (MRP)
Cost Efficiency
Topic
Resource Allocation for Profit Maximization
Difficulty
easy level question
Cognitive Level
understand
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