### CFA Practice Question

There are 539 practice questions for this study session.

### CFA Practice Question

The marginal revenue product of a resource is ______
A. the marginal product of the resource multiplied by the price of that resource.
B. the marginal product of the resource multiplied by the price of the output it is used to produce.
C. equal to marginal revenue, i.e., the increase in the firm's total revenue which is generated by selling one more unit of output.
Explanation: Marginal revenue product is the addition to the total revenue of the firm generated by adding one more unit of a resource. It is equal to the increase in output multiplied by the marginal revenue of the output.

User Comment
cbb1 MRP = marginal product of a resource (e.g. 1 labor hour produces 2 units) mulitplied by the marginal revenue generated by the 2 units. Why is it the price of the output and not marginal revenue of the output in the answer? Marginal revenue could be lower than the price of the 2 units if you had to lower prices on all units to sell the last 2 units. Any explanation?
wollogo I agree, this answer is for VMP (Value of Marginal Product) not MRP (Marginal Revenue Product). VMP=MRP only in a price taker situtatio where MR=AR.
h1bvisa yes you should assume it's a competitive market if not given. The price should not change at all.
Lamkerst MRP=MP*MR
I have barely understood the meaning of B.
Chebum A and C wrong = B ir right. Only way I got it.
ddrmax A could only be right under perfect competition, where P = MR
robbiecow MRP = dTR/dX, where X is the input (e.g., worker)
TR = Output x Price, rearrange the above
d(Output x Price)/dX, rearrange to
(dOutput/dX) x (dPrice/dX), note that the second part doesn't change; therefore, it is just the unit price of the output (e.g., I charge \$1 for lollipops regardless of my workers)
(dOutput/dX) = MP

Therefore the equation become MP x Price of my good = MRP