Learning Path
Question & Answer
Choose the Best Answer
Price of Capital
Total Revenue
Labor Supply
Market Demand
Understanding the Answer
Let's break down why this is correct
When a firm adds one more worker, it looks at how much extra output comes from that worker and compares it to the worker's pay. Other options are incorrect because People sometimes think the extra output of a machine should be judged against how much money the firm gets from selling all its products, but the firm only cares about the price of the machine itself; Some students believe that the extra output of a machine is linked to how many workers are ready to work, but the workers’ availability does not set the price of machines.
Key Concepts
Profit Maximization
easy level question
understand
Deep Dive: Profit Maximization
Master the fundamentals
Definition
Profit maximization involves firms optimizing their resource allocation to achieve the highest level of profit. This process includes comparing the marginal revenue product of labor and capital to their respective prices, aiming for both ratios to be equal to one for optimal resource utilization.
Topic Definition
Profit maximization involves firms optimizing their resource allocation to achieve the highest level of profit. This process includes comparing the marginal revenue product of labor and capital to their respective prices, aiming for both ratios to be equal to one for optimal resource utilization.
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.