Question : An employer goes on employing more and more of a factor's unit until:
Option 1: the average revenue productivity becomes equal to the marginal revenue productivity
Option 2: the marginal revenue productivity becomes zero
Option 3: the diminishing marginal returns set into operation
Option 4: the marginal revenue productivity of a factor becomes equal to its reward
Correct Answer: the marginal revenue productivity of a factor becomes equal to its reward
Solution : The correct answer is the marginal revenue productivity of a factor becomes equal to its reward .
According to the Marginal Productivity Theory , a factor unit's reward or price is determined by its productivity or effect on the overall product. An employer analyses the Marginal Revenue Productivity (MRP) of the lost unit with the marginal cost of the component while using a factor. He will use a factor until the reward (marginal cost of the factor) paid to the factor matches the factor's MRP. If the MRP is more than the marginal cost, the employer improves its profits by employing more units of the factor; if the marginal cost is greater than the MRP, the company reduces employment to lower its loss.
Related Questions
Know More about
Staff Selection Commission Sub Inspector ...
Application | Eligibility | Selection Process | Result | Cutoff | Admit Card | Preparation Tips
Get Updates BrochureYour Staff Selection Commission Sub Inspector Exam brochure has been successfully mailed to your registered email id “”.




