ECONOMICS:PRIN.+POLICY-MINDTAP (1 TERM)
ECONOMICS:PRIN.+POLICY-MINDTAP (1 TERM)
14th Edition
ISBN: 9781337912396
Author: Baumol
Publisher: CENGAGE L
Question
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Chapter 18, Problem 1DQ
To determine

Impact of buying small quantity of input and its MRP is higher than the price.

Expert Solution & Answer
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Explanation of Solution

When the firm purchase less quantity of input and the MRP is higher than the price, the firm will give up the profit that it could gain by purchasing an additional unit of input for that the MRP obtain by the firm is higher than the price the firm pay.  

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Students have asked these similar questions
Why would a profit-maximizing firm expand the use of each input until its marginal revenue product equals the price of the input?
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