Question

The marginal revenue product of capital is _______.

A. the economic rent received by hiring an additional unit of capital
B. the cost to the firm of renting an additional unit of capital
C. the revenue generated by substituting capital for labor in the production process
D. the change in the firm's revenue as a result of employing one more unit of capital, such as a machine.

Answer 1

D. the change in the firm's revenue as a result of employing one more unit of capital, such as a machine.

Step-by-step explanation:

Marginal Revenue Product (MRP) of a factor (here capital) is the change in firm's revenue, due to employing one additional unit of that factor.

It is calculated as : product of Marginal (additional) product from the factor (capital) , with marginal (additional) revenue of a product

MRPS (k) = MPP (k) x MR

Eg : If MPP of capital (k) = 5 , MR = 10 .

So, MRP (k) = 10 x 5 = 50