Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Firms should allocate resources to equalize the marginal revenue product of labor and capital.
B
An increase in the wage rate will always lead to a decrease in the marginal product of labor.
C
Profit maximization occurs when the ratio of MRP of labor to its wage equals the ratio of MRP of capital to its price.
D
Resource allocation should prioritize labor over capital regardless of cost and productivity.
E
Efficient resource allocation can lead to improved profitability and production efficiency.
Understanding the Answer
Let's break down why this is correct
Answer
Resource allocation for profit maximization means using resources in the best way to make the most money. This involves deciding where to invest time, money, and effort to get the highest returns. For example, if a company has a limited budget, it might choose to spend more on advertising a popular product instead of a less popular one, as this could lead to higher sales. The key idea is that businesses must analyze the costs and benefits of their choices to ensure they are directing resources to the most profitable areas. Ultimately, effective resource allocation helps companies achieve their financial goals and grow their profits.
Detailed Explanation
All the statements provided misunderstand how firms should allocate resources to maximize profits. Other options are incorrect because This suggests that firms should make labor and capital equally productive; This implies that higher wages always reduce worker productivity.
Key Concepts
Resource Allocation
Profit Maximization
Marginal Revenue Product
Topic
Resource Allocation for Profit Maximization
Difficulty
medium level question
Cognitive Level
understand
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