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A profit-maximizing firm will use more of a factor of production when: The extra cost of...

A profit-maximizing firm will use more of a factor of production when: The extra cost of using an additional factor unit is less than the marginal physical product of the additional factor unit. The marginal physical product of the additional factor unit is less than the marginal revenue product of the additional factor unit. The marginal physical product of the additional factor unit is greater than the marginal revenue product (MRP) of the additional factor unit. The extra cost of using an additional factor unit is less than the marginal revenue product of the additional factor unit.

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Answer #1

The extra cost of using an additional factor unit is less than marginal revenue product of the additional factor unit.-- is correct.

A firm's profit is maximised when marginal cost is equal to marginal revenue product.

Equality between marginal revenue product and marginal cost means profit is maximised because at this point real cost of using additional factor unit is equal to revenue from using additional factor unit.

If marginal cost is less than marginal revenue product profit can be increased by increasing the number of factor units.

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